Torrance, Ca. (PRWEB) June 16, 2006
The rising manufacturing costs on thousands of rubber products worldwide will soon be felt as raw Latex and other production costs continue to escalate beyond anyone’s comprehension.
Raw Latex is now at an all-time high as the rains continue to fall; making harvest a big problem in several rubber producing regions in Asia. At the same time worldwide demand continues to rise. Many manufacturers are now faced with very difficult decisions on whether to continue to sell finished products at a loss or discontinue production altogether. Recently the philosophy has been to sell at cost or below if need be, with hopes of regaining profits when raw material costs come back down. Unfortunately raw materials have continued to soar with no end in sight.
One product, latex examination gloves, has been particularly hard hit. Everyday something new affects the manufacturers rising costs. The raw Natural Latex comprises about 60% of the total cost of latex examination gloves. Combined with rising raw Latex costs, fuels used in manufacturing and the weakening of the U.S. dollar overseas has also impacted the foreign manufacturers. Soon the contract in Malaysia for natural gas will expire and is expected to rise approximately 25%. Currently, natural gas alone comprises roughly $1.60 per 1,000pcs of latex gloves. In addition to latex and natural gas, other factors include processing chemicals, huge investments in equipment, compensation to employees, etc.
Per the attached chart, raw latex in Malaysia has taken a jump from 3.74 ringgit in June of 2005, to 6.59 ringgit today, just one year later. With the current conversion rate of 3.65RM to US$1, the cost of the latex and fuels required to produce examination gloves is approximately US$20.00 before any profits. The current market price in Malaysia is between $18 and $20 per 1,000 for finished pre-powdered exam gloves. When the industry is faced with such huge increases in material costs in such a short period of time, it is extremely difficult to pass on the increases as quickly as they have been developing. In order for glove manufacturers to remain viable companies and much needed suppliers to the world there will need to be a market price adjustment of at least US$4.00 per 1000 in the very near future. In an extremely competitive market many factories have been in a wait-and-see mode, hoping others will react first with major price increases. For many of these factories, as they attempt to hold on and wait, they loose several dollars on every case that they produce. A medium size factory produces and sells at least 40,000 cases every month making the losses staggering. The larger the factory, the greater the losses.
Some factories have chosen to take measures such as adding fillers and producing thinner, lighter gloves taking a chance on compromising the barrier properties of the gloves. Others have actually begun to “short count” cartons, some as much as 10%. This is a frustrating problem for both the consumer, who gets short changed unknowingly, and the ethical Distributor faced with large cost increases trying to compete with another Distributor that might be selling for less by lessening the quantity.
With Natural Latex in such turmoil, Synthetic Glove products have taken on a new attraction with buyers. There are several to choose from varying greatly in fit, function and price. The issue with Synthetics is that none of them compare to Natural Latex when all factors are combined. Latex has become the gold standard for consumers, as well as being an economical choice in the past. Now, when manufacturers must adjust prices in order to survive, many consumers will have trouble justifying the higher prices and will instead choose to make the change to Synthetics.
A huge advantage many don’t realize with Natural Latex is the “green” factor. Not many consumers even think about it. However, Natural Latex is the only environmentally friendly glove product available. If the medical industry ever leaves Natural Latex altogether we will have a huge disposal problem as only Natural Latex is organic and decomposes. Synthetics must be burned or put into landfills for the next generation to worry about.
“Our company has stocked up on Non-Latex Synthetics such as our KoolTouch™ Nitrile and our UniSyn™ Stretch Vinyl gloves hoping to satisfy some of our valuable customers while latex is so unstable,” says UG Healthcare President Ken Stanton. “We are still very hopeful that latex prices will come down later in the year as it is the product that many consumers would really rather use for most applications. In the meantime we must have options for them to use while we all weather the storm.” We haven’t seen anything like this in over twenty years.