Rubber Tycoons Make Their Debut Among Thailand’s Wealthiest Due to Growing Demand For Medical Gloves
As tire sales were decimated by the pandemic, Thai rubber producer Sri Trang shifted its focus to medical gloves, establishing Thailand as a global supplier.
Covid-19 initially stifled growth at Sri Trang Agro-Industry by deflating tire sales—rubber for tires accounted for the lion’s share of the company’s sales—along with car purchases. Rubber prices, which were already depressed prior to the pandemic, fell further. As a result, Sri Trang shifted gears and increased rubber glove production in response to soaring global demand for protective gear.
The move paid off, with Sri Trang’s revenue increasing by 80 percent year on year to 32 billion baht ($1 billion) in the first quarter. Its Thai and Singapore-listed shares soared to new highs, boosting cofounders Somwang and Viyavood Sincharoenkul’s net worth to $865 million and putting the father and son on the list for the first time.
Rubber gloves accounted for a quarter of Sri Trang’s revenue prior to the pandemic. This percentage has increased to 41% as the group plans to sell more than 28 billion pieces by the end of 2020.
Sri Trang was founded in 1987 by Somwang and his son Viyavood following a four-decade career with a Thai rubber producer. Sri Trang’s chairman, Viyavood, took over in 2010; Somwang serves as an honorary advisor.
Sri Trang produced more than half of Thailand’s output last year, according to Viyavood’s son, Veerasith Sinchareonkul, an executive director of Sri Trang and president of the Thai Rubber Glove Manufacturers Association, in a video call from Bangkok.
Thailand has overtaken China as the world’s second largest manufacturer of rubber gloves, accounting for roughly a fifth of global production in the $28 billion industry.
Nonetheless, it trails Malaysia, the industry behemoth that produces nearly two-thirds of the world’s rubber gloves. To help Thailand become the next glove hub, the government’s Rubber Authority of Thailand is offering loans to local manufacturers to help them expand production and upgrade equipment.
Sri Trang anticipates spending 22 billion baht by 2022 to increase capacity to 50 billion gloves. It has already increased its glove manufacturing capacity from three in 2019 to eight.
In May, the group successfully completed the secondary listing of its profitable subsidiary Sri Trang Gloves in Singapore, raising S$5.4 billion ($4.1 billion) in market capitalization. It went public on the Thai stock exchange in July 2020 — the country’s first post-lockdown IPO — and raised $482 million to fund expansion.
Rubber gloves accounted for 41% of Sri Trang’s revenue, with the group expecting to sell more than 28 billion pieces by 2020.
Ten companies entered Thailand’s glove market in the last year, including petroleum giant PTT, in response to the unprecedented demand, but Veerasith believes only a few new entrants will survive.
“They’re just discovering how difficult it is to establish a glove factory in Thailand. It requires significant investment, and the sales side requires extensive experience and certification from a variety of countries,” he explains.
He is optimistic about Thailand’s future in glove manufacturing, forecasting a 17% increase in 2021. Sales will remain stable following the pandemic, he says, as aging populations and an expanding middle class drive the healthcare market. Meanwhile, he anticipates that demand for tires will recover as a result of increased car sales.
Manufacturing And Tapping Of Rubber As a result of an excess of rubber and a scarcity of tires, tappers find themselves in a sticky situation.
Rubber prices have increased nearly 75% in the last year, but Veerasith warns that a flood of farmers to the market could jeopardize the industry’s recovery. “We anticipate that travel, manufacturing, and automobile consumption will return to normal [after] 2020,” he says. “If it does not recover in the expected time frame, that could be cause for concern.”