For want of a nail the shoe was lost,
for want of a shoe the horse was lost;
and for want of a horse the rider was lost;
being overtaken and slain by the enemy,
all for want of care about a horse-shoe nail.
There is a critical shortage of the gloves needed to slow the spread of Covid-19 (nitrile and latex gloves) that few are paying any attention to. Like the nail in Ben Franklin's old proverb, this shortage of seemingly innocuous items will soon impact the re-opening of some economies and shutter many businesses.
Unfortunately, this glove shortage is about to get worse, with prices increasing further.
By way of background, in order to help produce low risk/high return investments we established a trading company in Malaysia, Seagate Global Trading Sdn Bhd, which has helped cut the price of materials dramatically.
Since Malaysia produces 70% of the world's nitrile and latex gloves, friends started coming to me asking to help source gloves there in the fight against the spread of Covid-19.
As the trading team surveyed the glove market, they informed me that large well capitalized state and corporate players are quickly buying up what little supply is left of nitrile and latex gloves, as well as pre-paying for hundreds of millions of boxes of gloves on a contract basis. They are cornering the market, and few are aware of it. This is not hype; this market is about to be fully sold out for the next two years, and in my opinion is a serious potential health and security risk for those countries and organizations that run out of supply.
Don’t think of this glove shortage as similar to the mask crisis we had at the beginning of the pandemic. That got fixed pretty quickly as most masks are low tech and can be produced quickly in size. Supply flooded the market within a month. Presto, no mask crisis. Latex and nitrile gloves, while perhaps less critical, are none-the-less important to safely re-opening an economy, and unlike masks, supply cannot be quickly ramped up.
Rubber is the key ingredient in latex gloves. To increase the supply of rubber one needs to plant more rubber trees and wait at least five years for the trees to produce rubber. The amount of rubber is fixed for any given year. Nitrile gloves do not require rubber but require a large amount of liquid natural gas. Producing latex and nitrile gloves is a high-tech process using expensive precision machinery, a large factory, and a large skilled labor force. This all takes time and money to ramp up.
Whatever extra capacity there was has been deployed. Glove factories in Malaysia are operating at 90-95% capacity. At the same time, many analysts expect demand to remain high and even increase as the economies start to open up and gloves are required in new protocols to protect the public when they were not used before Covid-19. For example, I had breakfast at a Marriott Hotel recently and the server had on latex gloves. She told me she uses 4 sets of gloves per table. That is at least one box of 100 gloves per shift, per server! That is new demand that did not exist pre-pandemic. You do the multiplication to estimate coming demand.
More bad news, The Wall Street Journal reported the crisis is so bad that; “Brokers are peddling counterfeit medical gloves as a shortage of this critical commodity has tripled prices and pinched other front-line workers as schools and businesses reopen.” (Wall Street Journal, September 15, 2020, “Brokers Peddle Fake Medical Gloves Amid Coronavirus Shortages”)
The WSJ article said many brokers in the market simply cannot be trusted. As for the tripling in price, expect to get squeezed more.
Worse yet, Malaysia is closed to international travelers due to the pandemic, so buyers cannot go to Malaysia to try and book new orders or vet brokers. And once inside Malaysia, movement is restricted.
Call factories directly and if you are lucky enough to get through you will be told the earliest delivery date is in 200 days and many of the larger manufacturers have wait times for new orders of over 600 days.
This market is a train-wreck in progress that few are aware of. Yet.
Now a little good news. If you act quickly and use one of the few trust-worthy and connected Buyer’s Agents inside of Malaysia (as opposed to brokers like the WSJ cited), you can still secure some of the limited supply of spot gloves before prices rise further and the market is 100% sold out. For better pricing and larger orders, a sharp Buyer’s Agent can negotiate a monthly supply contract out to 2 years for you.
A good Buyer’s Agent in Malaysia will be independent and have direct relationships at all the largest glove manufacturers as well as large wholesalers. They will take your order, discretely canvas the market for you; and report to you the size, price, and terms at which you can execute. Once you agree on the price and terms, SGS or other international certification company of your choice will go to the warehouse with the Agent to certify the gloves are genuine and meet your requirements. If acceptable you will make payment versus delivery. An Escrow Account or LC can be used to protect you. Shipment can be arranged by the Agent on your behalf. All transparent and above board.
The selection of your Buyer’s Agent is key to your success. I recommend five simple criteria for your Buyer’s Agent:
A five year or longer track record in the supply business in Malaysia (fully licensed);
Relationships at the 26 largest glove manufacturers to directly negotiate supply contracts on your behalf;
Official Supplier to the Government of Malaysia;
Endorsed by the Government of Malaysia;
Associated with a reputable US or European consortium that insists on international standards of good governance.
Seagate Global Trading Sdn Bhd is the only Malaysian company that meets these criteria. Visit www.SeaGloves.com for more information on their Disposable Glove Buyer’s Agent Program in Malaysia.