Due to the recently announced 50% US tariff on Chinese surgical gloves in 2024 and the subsequent 100% in 2025, Sri Trang Gloves (Thailand) PCL. (SET: STGT) is anticipating increases in export order from China, warranting this year’s annual sale at 40 billion pairs, with Sri Trang Agro Industry PCL. (SET: STA) supplying raw materials.
STGT saw its price reach THB 12.90 highest, closing at THB 12.20 yesterday – a 20.79% or THB 2.10 increase, with a total trading value at THB 861.11 million, while the parent company STA, being the supplier for STGT’s production and recipient of increased profit sharing, saw its price highest at THB 23.30, closing at THB 22.70 – a 7.58% or THB 1.60 increase, with a total trading value at THB 1,319.83 million.
STGT and STA Investor Relations told “Kaohoon” both companies are directly affected by increased tariff which comes a year earlier than expected, resulting in much shorter preparation time. STGT has been contacted by Chinese customers with regard to future orders yet to undergo valuation. Nonetheless, new orders should begin to flow in during Q4F24, provided STGT normally takes orders 2 months in advance. In the meantime, STA foresaw increasing orders would allow STGT to achieve a quarterly sale at 10 billion pairs and further price adjustments.
FSS International Investment Advisory Securities Ltd. or FFSIA, a subsidiary of Finansia Syrus Securities PCL., specified that STGT and STA prices increase in connection to the tariff jumping to 50% in 2025 and 100% in 2026. The United States Trade Representative (USTR) has also increased general taxes on numerous Chinese goods including the mentioned gloves in May 2024 from 7.5 to 25%.
The 2024 data showed the United States brought in disposable surgical gloves mostly from Malaysia at 47% of its total imports, followed by Thailand and China at 28% and 22%, respectively. That said, the tariff hike would produce a positive outcome for Thailand, given China has always been a major competitor. Thailand may be more fortunate due to STGT being the only major player and the world’s third largest exporter in charge of a comprehensive 19% share in the North American region.
The hike on this occasion would result in the price of Chinese gloves skyrocketing from USD 16-17 for a thousand pairs to USD 24-26 for the same amount under the 50% tariff, and USD 32-34 under the 100%, thus recommending “Trading Buy” for both STGT, being an exceptional gainer, and STA as a successive beneficiary to higher profits realized – expecting a progressively more ferocious nitrile gloves market (being China’s major market), provided less export to the US, China would likely diversify into other markets. On the other hand, STGT earns mostly from natural rubber gloves at 75% of its total revenue, while nitrile gloves (NBR) make up the remaining 25%.
