Weakening demand for gloves following the easing of COVID-19 cases in many parts of the world has triggered a slump in rubber latex prices, forcing many farmers to go slow on tapping. Prices of rubber latex, a key raw material for gloves, elastic threads and other products, have slumped by 40 to 50 percent over the past few months.
Field latex prices, which vaulted to about Rs 185 per kg at the height of the pandemic, have fallen to about Rs 105 per kg now. Centrifuged or dry latex prices are now at Rs 84.55 per kg, declining from Rs 130 per kg a few months ago.
“Many rubber farmers had shifted from making sheet rubber to latex in the last two years as it was more profitable with the increase in demand. Usually, sheet rubber prices are higher than latex prices. But when the pandemic struck, latex prices went above that of sheet rubber,” said Scariah Vazhayil, director of Alleppey Latex.
The use of latex went up from about 8 percent of total consumption of natural rubber to 11 percent during the coronavirus pandemic as demand for gloves escalated. However, as demand weakened, manufacturers cut back on production.
“We have slashed production to 20 percent as there is a glut in the gloves market. Moreover, the company we supply latex for elastic threads has suffered a setback in exports,” said Rijo Mathew, managing director of Royal Latex.
Excess stock
According to a large rubber holder, centrifugal latex production had already exceeded demand before the pandemic. When COVID-19 struck, the processing capacity increased and is now lying unutilised with weak demand for gloves.
Glove companies the world over increased capacities to meet rising demand during the past couple of years.
“Now there is excess stock and companies in Malaysia, the largest supplier of gloves, which put on additional lines for production, have slashed their output,” said Joseph Perera, MD of Primus Gloves.
However, a resurgence of COVID-19 cases in China could keep the demand for gloves going.
“The surge in COVID-19 infections across China can potentially raise the demand for latex-based rubber gloves and other healthcare products manufactured from latex,” said Jom Jacob, former senior economist of the Association of Natural Rubber Producing Countries (ANRPC). “China’s continued strict enforcement of the zero-Covid policy provides an opportunity for rubber gloves and other healthcare products manufactured from latex.”
In the light of fresh COVID-19 cases in China, the World Health Organization (WHO) had said that the disease remains a global emergency and highlighted the need to maintain vigilance, although the number of cases had fallen in parts of the world in recent months.
According to Jacob, who is also chief analyst of WhatNext Rubber Media International, the WHO’s step back has contributed to positive sentiment in the glove manufacturing industry and latex market. The prices of shares of Malaysian glove makers have already started moving up after remaining low and under-valued for several months.
The price of RSS-4 variety sheet rubber used by the automobile industry is ruling at Rs 148.50 per kg now, above that of latex. This could prompt some farmers to return to sheet making, said George Valy, president of the Indian Rubber Dealers’ Federation.
However, conditions in other parts of the world look encouraging for latex production. In China, latex production usually comes down by the first half of December with the onset of extreme low temperatures as farmers stop harvests. There is almost no production of latex in China from January to April, spurring more imports.
The energy crisis can compel several nitrile glove manufacturing units in Europe to scale down operations. A potential increase in nitrile latex prices and disruption of nitrile latex manufacturing in Europe provide opportunities for natural rubber latex, at least for a few months ahead, according to Jacob.
“Although latex prices are expected to gain until April next year, major upswings in latex prices are unlikely as high prices can prompt many farmers and farmers’ groups to sell the produce in the form of fresh latex by deviating from sheet rubber or cup-lump, he said, adding that weak demand prospects for sheet rubber from auto-tyre manufacturing can also trigger a shift to latex.