Subject: Demand for Rubber Gloves Skyrockets Date: Published: 6/9/88 155 lines Source: WALL STREET JOURNAL. Copyright Dow Jones & Co. Inc. Demand for Rubber Gloves Skyrockets --- Profiteering During AIDS Crisis Suspected --- By Peter Truell Staff Reporter of The Wall Street Journal NEW YORK -- The medical glove market, already stretched thin, is getting even tighter. Reflecting the acquired immune deficiency syndrome crisis, prices for such gloves, and for the latex they're made of, have bounced as high as three times yearago levels. A growing number of producers, distributors, traders and consumers also suspect that the surge in prices reflects profiteering in the markets for gloves and for raw latex tapped from rubber trees. Demand, of course, accounts for much of the pricing pressure, as a wide variety of workers -- from municipal employees to police and health service workers -- have increased their use of gloves because of fear of transferring infection to other patients or to themselves. "Nurses can wear an average of eight to 10 pairs a day," says Edward Sun, vice president for marketing for the New York unit of Taiwan's General Pacific Corp., which brokers and supplies rubber gloves and other medical equipment. Because of such ballooning demand, the U. S. may now use as many as 10 billion latex and vinyl examination gloves a year compared with about two billion annually just a couple of years ago, estimates Joe Fleming of New Jersey medical distributor Med Mark. That's led to higher prices for gloves and for latex, headaches for purchasing agents, and complaints of suspected profiteering, price-gouging and other unethical practices. "It's been terrible. I feel like calling the attorney general about it," says Renatte Hechenberger, director of materials at New York Infirmary-Beekman Hospital's procurement department. "From what I see there's profiteering going on." Recently, the hospital has been paying about $75 a case for a thousand single latex or vinyl examination gloves, compared with about $55 or $60 a case a year ago. "Other places are having to pay $90 to $100 a case," says Ms. Hechenberger, who is spared such higher prices for the moment because she has long-term contracts. Beekman uses 100,000 exam gloves a month compared with 20,000 a month a couple of years ago, she says. In Phoenix, Ariz., Art Mires of medical supply company Medical Cos. of America says he is paying 10 cents or 11 cents a glove (or $100 to $110 a case), compared with five cents to six cents a glove (or $50 to $60 a case) a few months ago. Fearing infection from an accidental scratch or cut, surgeons, who wear more expensive latex gloves, now increasingly add to the growing demand by donning two or three pairs of gloves before an operation, hospital officials say. Beekman now goes through 5,000 pairs of surgeon's gloves a month compared with half that number a couple of years ago. Beekman recently had to pay $264 for a case of 200 pairs of surgeon gloves on the open market, compared with its long-term contract prices of $83 and $64 a case, because of a temporary shortage. Many analysts originally expected a sharply rising market for condoms in the face of the AIDS threat. While there's been some increase, demand for rubber gloves has caused the largest problem. "There's an incredible immediate shortage because of the crisis of AIDS. Usage has increased phenomenally," says Mr. Mires. Med Mark's Mr. Fleming says he no longer has to deliver medical gloves; customers are so eager to get supplies that they rush to pick up gloves when he calls them. U. S. producers also report a tight market for gloves. "Our Texas manufacturing operation {which makes latex exam and surgical gloves} is running 24 hours a day, 365 days a year," says Jeff Leebaw, a spokesman for Johnson & Johnson, New Brunswick, N. J. In response to the demand surge, the company is adding two new machines, and has canceled sales to a majority of its non-medical and industrial customers. A spokesman for Baxter International Inc., Deerfield, Ill., which makes well over a billion gloves a year, said the situation has been difficult for about a year. "We have been increasing capacity, but that takes a year or so," he said. A new Baxter plant in Malaysia will soon begin production; a second new plant is set to begin production next year. Some distributors say market shennanigans are more common with smaller, recently arrived suppliers and with some of the newer foreign suppliers. The big U. S. manufacturers "have behaved well," says Buddy Dortch, vice president of a unit of Durr-Fillauer Medical Inc., a big medical distributor based in Montgomery, Ala. He says he's only experienced small and understandable price increases from the big U. S. manufacturers. "We certainly haven't been able to get all the gloves we want. We've tried to supplement with imports from China and some other places," Mr. Dortch says. But unlike many others in the rubber glove market he believes "demand has peaked." Such demand has attracted all sorts of buyers and sellers. "You've got a lot of flakes coming into the market. There's false reliability, and goods tend to go to the highest bidder," Medical Cos. of America's Mr. Mires adds. He says he has lost money on letters of credit that he has paid to arrange but which have lapsed because suppliers haven't honored delivery commitments, preferring to take higher offers from opportunistic bidders. A General Pacific official says prices for raw latex have risen to about $2,200 a metric ton, compared with only $600 a ton last August. She notes that the Taiwan press has suggested that the governments of Thailand and Singapore recently interrupted latex shipments, leading to suspicions of a latex cartel in the making. Traders in the latex markets in Southeast Asia categorically deny such intentions. As one senior trader says "demand has actually outstripped supply because it caught everyone unaware." Part of the problem is that an increasing amount of latex is diverted to local production of goods such as tires and rubber sheeting. Local consumption of latex in Malaysia has increased over the past two years to an expected 115,000 tons this year from 100,000 tons in 1987 and from 80,000 in 1986, the head of one of the country's biggest rubber producing companies says. More latex plants will soon be built. There are now 116 permits pending in Malaysia to build disposable rubber glove factories, according to a senior executive at one large local conglomerate. Indonesian and Chinese manufacturers also are racing to meet the rush in demand. Industry sources in Thailand confirm the sharp increase in latex prices to $2,000 a ton from $800 to $850 a ton in January. The rise, they say, is due to the winter season, when sap production falls, and to the tremendous increase in demand, particularly in the U. S., for latex for rubber glove production. To ensure local supplies some Thai latex users have tried unsuccessfully to pressure their government into banning latex exports, local industry sources said. The latex shortage in Thailand and other big latex-producing countries probably won't diminish quickly. Trees take seven years to reach maturity, and chemical stimulation of older trees hasn't been that successful. To help ease the problem, some latex now used elsewhere can at least be diverted to glove manufacture, some Southeast Asian industry officials said. For example, some substitution can occur with synthetic rubber replacing latex to make tires and some other products. --- John Berthelsen in Singapore and Helen White in Thailand contributed to this article. (Revised WSJ June 16, 1988) [This article is made available here by Dow Jones Co. for the personal and non-commercial use of callers to this bbs, in the hope that it will be of some help to those who are suffering from the disease and others who are seeking to help them.]