What is the Q4 PPE Global Glove Market Outlook?
A question and answer session from SW Safety:
SW Q4 2020 GLOBAL PPE GLOVE MARKET OUTLOOK Q&A
As we are entering the fourth quarter of this incredibly challenging and dynamic year, we have asked Celia Bu, SW Procurement Manager, and Catherine Tang, SW Global Customer Care Logistic Manager, to discuss the questions that their teams are receiving from our customers.
What is the status of the market today?
CATHERINE: At the beginning of the pandemic, our customers were primarily concerned about product availability, and this remains an issue. But in June we started seeing significant changes in pricing.
CELIA: The price surges are due to the ongoing supply chain imbalances. As the coronavirus spread globally, there has been a sustained exponential increase in demand that manufacturers have not been able
to keep pace with. And now, raw goods, like nitrile, are in limited supply. This has made it even more difficult for manufacturers to fulfill the escalating demand.
How does this impact single-use glove prices?
CELIA: Both the cost of goods and the cost of production have been steadily rising. And now we are seeing drastic price hikes as we enter the fourth quarter. In China and Southeast Asia alone, single-use glove prices have gone up 80 to 100 percent since May 2020.
CATHERINE: However, our Customer Care team has been working hard to keep our customers updated about the impact of rising costs. It’s a very dynamic market as we are seeing prices increase on a monthly basis.
What are the reasons for these dramatic price increases?
CATHERINE: First, the rising cost of manufacturing was due to regional factory Movement Control Orders to ensure worker safety. These COVID-19 related safety protocols led to production costs going up by 8 to 10 percent. Next, shipping costs have been driven up in response to the growing demand during the peak shipping season, which spans from the end of summer into the fall.
CELIA: In September, product prices increased 34 percent and are projected to continue rising another 50 to almost 100 percent through December due to the cost of nitrile butadiene rubber (NBR). Specifically,
the cost of the chemicals used for glove processing has increased up to 60 percent. Acrylonitrile and butadiene are also in high demand, causing our suppliers to increase their material prices by as much as 447 percent since April 2020.
Will these prices be stabilizing in Q4?
CATHERINE: There are several raw material plant closures in November and December for scheduled maintenance that will lead to further delays in glove supplies. The additional delays and material shortage during this time will significantly influence pricing. We are expecting Q4 2020 NBR prices to reach new record highs. There are new reported COVID-19 infection cases at manufacturing facilities in Malaysia and other Southeast Asia countries. This also will result in near-term price and delivery uncertainty due to both worker safety and labor shortage issues.
CELIA: On top of the backlog, glove factories are trying to ramp-up production which is driving up the cost of raw materials as they look to acquire materials for their new production lines. As raw materials will continue to remain in short supply, factories will continue to have difficulties in optimizing new production. This will have a dramatic impact on glove availability and pricing well past Q1 2021.
One positive thing looking further ahead is that new nitrile raw material factories will begin to come on-line in Q2 of 2021– it takes 12 months to add new production capacity. Glove manufacturers will be able to increase output by 20 percent because of this new nitrile supply.
Will shipping dates be affected?
CELIA: We are starting to see some manufacturing plants begin to manage higher volumes of orders beyond their anticipated capacity. We can only hope this continues.
What is the SW plan for tackling price increases?
CATHERINE: Our CEO, Belle Chou, has put a priority on three major initiatives. The first is transparency and focusing on keeping customers and employees up to date as best we can. She is very serious about this and
is very involved with global PPE manufacturers. Second, Belle made the strategic decision to optimize our SW single-use glove portfolio to produce products more efficiently. We did this early on to better support our customers. Recently, we have been looking into quality alternatives to NBR – the first of which was introducing the BantamTM brand of thermoplastic elastomer gloves (TPE). There also are many other internal initiatives in the works at SW.
What does SW have planned for Q4 and next year?
CATHERINE: We are looking for ways to stabilize pricing to make it easier for our customers to plan and place orders. We are implementing a cost forecasting model to allow us to release prices 30 days in advance so our customers can better predict pricing for their customers.
CELIA: Additionally, we are researching new ways to reduce the customer investment in single-use gloves by maximizing performance values and extending the life of SW products. Through extended wear technologies and by combining the use of hand sanitizers we have developed case studies documenting their extended life.
What’s in store for SW?
CATHERINE: Although this is a challenging time, SW remains committed to protecting workers, keeping our customers posted, and most recently helping other manufacturers in the industry. Belle has spent a great deal of time with other manufacturers to share best practices and identify ways everyone can work together to provide products to customers.
CELIA: She has also challenged us to continue to stay ahead of changes. We have dedicated internal resources to focus on monitoring the global market from material cost fluctuations to shipping and supply chain costs. And
as production capacity begins to increase in the coming year, SW has made investments in these developments to better deliver products to our customers.
CATHERINE: Moving forward, we want to continue to be transparent and inform our customers. If you have
any questions about this fourth quarter or any future topics, please contact the SW Customer Care team. We are happy to continue to update our community on these changes and will keep you in the know.
Celia Bu, SW Procurement Manager and a Certified Professional in Supply Management, can be reached at cbu@swsafety.com. Catherine Tang, SW Global Customer Care Logistic Manager and a Certified Six Sigma Green Belt, can be reached at ctang@swsafety.com.