Guotai Haitong: Industry regional supply and demand rebalancing, a new competitive cycle for medical gloves has begun.

Guotai Haitong released a research report stating that the price inversion of medical gloves between China and the United States will first lead the industry into a rebalancing of regional supply and demand relationships. As external disturbances fade and regional supply and demand rebalance, the industry will gradually enter a new competitive landscape. The firm expects that supply chain efficiency and comprehensive cost control will remain the main themes for the future, while the overseas capacity expansion of Chinese manufacturers will introduce new variables to the global market. Guotai Haitong's main points are as follows: U.S. Imports: Increase in volume and decrease in price, with competition environment driven primarily by price 1) Volume: The U.S. has maintained growth and did not decline as anticipated. The conflict between the U.S. and Iran in March 2026 caused a tightening in the supply of petrochemical raw materials, leading to a significant contraction in the supply of nitrile rubber, a core material for nitrile gloves, in Southeast Asia. The market actively interpreted this as a supply gap. However, looking at the import data from the core consumption market of nitrile gloves, the U.S., both in April and May, as well as the combined monthly volume for April and May, saw an increase in import volume. 2) Price: Raw material prices remain high, while the average import price is at a historical low. Following the U.S.-Iran conflict, there was a noticeable rise in the prices of raw materials like butadiene, and shortages in materials like nitrile rubber should have fully translated into higher nitrile glove prices. However, U.S. Customs import data shows that from April to May 2026, the unit price of imported medical gloves in the U.S. was at a low point relative to the past few years and even lower than when raw material prices were low in the previous year. Chinese Exports: Increase in both volume and price, smooth transmission mechanism 1) Volume: In the second quarter, China's exports reached a historical high since 2002. As the impact of the sharp reduction in exports to the U.S. continues to be digested, the growth rate of China's medical glove exports rebounded from the lowest point since November 2025, maintaining positive growth since 2026, and benefiting from the upward trend in export volume post external market supply disturbances. 2) Differences in competitive landscape result in significant discrepancies between Chinese export prices and U.S. import prices. The average export price of Chinese medical gloves surged significantly in the second quarter of 2026, mainly because domestic exports had faced pressure from overall low profitability due to excessive capital expenditures during the pandemic, compounded by the sharp decrease in exports to the U.S. in 2025, leading to actual gradual contraction in the domestic production capacity of medical gloves, creating stronger motivation for price increases and profit improvements in the industry. Price inversion of medical gloves between China and the U.S. will first lead the industry into a rebalancing of regional supply and demand relationships Due to the aforementioned differences in supply between the U.S. and non-U.S. markets, in May 2026, China's average export price of medical gloves to non-U.S. markets surpassed the average import price of the U.S., resulting in a rare price inversion. This will inevitably lead Southeast Asian manufacturers that can export to non-U.S. markets to increase their sales proportion to those regions to improve their capacity, while alleviating the rapid expansion of supply for exports to the U.S. This will boost the average import price in the U.S. and exert downward pressure on China's export price. Considering that the industry's capacity utilization continues to remain low, the supply side still has elasticity, and the cost curve is a key variable Taking Malaysia's largest glove manufacturer, Top Glove, as an example, it installed a capacity of 95 billion pieces and has an operating capacity of 64 billion pieces with an operating capacity utilization rate of only 50%-70%. Other Malaysian and Thai glove manufacturers have similar conditions. Therefore, when market prices and profits are high, some idle capacity will be put into production, putting pressure on prices. Thus, appropriately squeezing market prices and controlling supply may become a primary competitive strategy for industry leaders in the future, which is fundamentally driven by considerations of the cost curve. Risk Warning Downstream demand may fall short of expectations, competition in the industry may intensify, etc.