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Unigloves® Coronavirus (COVID-19) Update, V6

Donald Gillespie All, Company, Unigloves, supply chain, coronavirus
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It's been a little while since we last wrote about our response to COVID-19, so we wanted to share an update with our view on the current situation, and our expectations over the next few months relating to disposable gloves.
As winter approaches and COVID-19 cases are again on the rise, we expect the demand for disposable gloves to continue to outstrip supply for some time. Although many glove producers, including Unigloves' parent company, UG Healthcare, are working hard to increase production capacity, constraints on the supply of raw materials are likely to restrict growth and ensure that prices remain high over the coming months.

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The macro-situation

Since the global spread of COVID-19 in early 2020, demand for disposable gloves has accelerated with market participants in some countries reporting order increases of up to 500% between January and July 2020 as importers and end-users, including governments, have tried to meet additional demand and replenish pandemic buffer stocks.
While growth in demand has been highest in Europe in Germany and Spain, demand from the UK has increased 400% post-COVID, driven by huge increases in demand in the medical and care sectors, but also in food preparation and industrial sectors who have increased their focus on hygiene.

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How are the glove-producers reacting to the situation?

Whilst factories are working hard to increase their total manufacturing capacity, lead times for new production lines are no less than 12-18 months and are impacted by a range of factors including the availability of raw materials, workers and utilities.
In the interim, the factories have been able to increase aggregate utilisation levels (from an average of around 85% in 2019 to around 95% in 2020), to drive annual capacity up from 300 bn gloves per year in 2019 to around 320 bn gloves per year in 2020.
Even with this additional capacity, demand continues to exceed available supply, and the situation has been further complicated by shortages of nitrile butadiene rubber. Expansion for production of this raw material requires a longer lead-time of two to three years, with higher capital expenditure.
To keep production lines running at the highest utilisation levels, producers, including Unigloves' parent company, UG Healthcare, are paying 300% more for nitrile raw material in the spot market. We anticipate that the shortage of nitrile raw material will be even higher in the months to come, resulting in further increases in the price for gloves, and this situation could continue into 2022.
The nitrile situation has caused a knock-on effect to other glove raw materials including latex and vinyl, meaning costs remaining high on all polymers for the foreseeable future. We continue to monitor this situation and will publish more updates accordingly.

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Unigloves’ approach

Our supply chain in the UK and in China and Malaysia are continuing to work to source additional supplies on top of our group-owned capacity, across all glove types. At the same time, we have continued to run our allocation process in the UK to ensure our stocks are supplied as fairly as possible across our distributor base. Clearly, this has not, and could not, satisfy everyone, but we feel it remains the best way to manage what continues to be an exceptionally challenging situation.
We continue to receive daily enquiries for new accounts; for the foreseeable future, we will continue to turn away this business to prioritise support for our existing distributor partners.
We are very aware that the current combination of limited monthly supply, higher prices and, in most cases, tighter credit limits poses a huge challenge to your business and, consequently, our business. So we’d just like to say a very big thank you again to our customers for their custom, loyalty and patience during this challenging period, and we all share a hope that we can return to some level of normality sooner rather than later.

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