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SEMPERGRAMS


December 22, 2017
Supply Chain Constraints Affecting Glove Pricing
Many supply chain constraints are currently affecting the production and logistics costs of disposable gloves manufactured in Asia. This will result in necessary price adjustments in early 2018.

Factors affecting the glove manufacturing industry are the rising costs of natural gas, packaging, and raw materials. A weakened US dollar also plays a key role in the need for a price increase.

As expected, these price increases will be passed along to glove consumers. In 2018, more than a 20% increase in the natural gas tariff will occur. According to analysts, natural gas constitutes approximately one tenth of a glove manufacturer’s production costs. Most factories are in the process of adjusting prices in anticipation of this increase.

A weakened US dollar causes the prices of imported goods to increase for consumers. The Malaysian ringgit has strengthened by 10% against the dollar in 2017. Moreover, the weakening of the US dollar has a direct impact on the profit margins of foreign manufacturers.

A shortage of recyclable materials is also a factor in price increases of packaging materials. The root cause is rapidly dwindling readership of newspapers and magazines worldwide. This translates to an increase of about 20 to 30 cents per carton of gloves. Industry analysts foresee this shortage to continue well into 2018.

Environmental regulations imposed at the end of 2016 on Chinese factories producing vinyl and low-quality nitrile gloves continue to add to the supply chain constraints, whereas many others are still not operating at full capacity (if at all). Factories are required to install and complete boiler upgrades to meet regulations before they can resume production. While Sempermed does not source any of our nitrile products from China, these environmental restrictions will impact the entire supply chain as customers shift toward ordering from factories in Thailand and Malaysia.

All that said, please be assured that Sempermed is monitoring the situation closely and will communicate further details as they become available.