Billionaires Making 'Boatloads Of Money' From ... - Forbes

Nitrile gloves have become extremely difficult to find &#;and expensive&#;thanks to Covid-19. Amid accusations of profiteering, everyone from Malaysian rubber magnates to Polish upstarts are cashing in.

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In the first months of the Covid-19 pandemic, doomsday headlines warned of impending shortages of ventilators for severely ill patients. Then states scrambled to source masks and gowns as borders quickly shut, igniting a bidding war for personal protective equipment. Eventually, domestic production kicked in to save the day, churning out everything from respirators to face shields. But one item in particular is still in critical shortage as the pandemic lurches into its second year: medical gloves.

Nitrile gloves, preferred by hospitals for their hypoallergenic and chemical-resistant properties, are now increasingly expensive and difficult to source at any price. In the U.S., the national stockpile reported in December that there were only 72 million gloves on hand out of a target of 4.5 billion, forcing individual states to navigate a wild market rife with shadowy middlemen and black-market brokers, some outright frauds. The surging demand has sent prices skyrocketing: A box of 100 nitrile gloves now costs as much as $32, up from around $3 prepandemic, according to Singapore-based Persistence Market Research. The frenzy has minted at least four new medical glove billionaires and centimillionaires: Stanley Thai ($1.5 billion, Malaysia), Lim Kuang Sia ($1.2 billion, Malaysia)*, Somwang Sincharoenkul ($730 million, Thailand) and Wieslaw Zyznowski ($670 million, Poland).

&#;At this point there isn't even a pretense of passing this on because costs are going up,&#; says Bruce Levitt, the CEO of Levitt-Safety, a Canadian safety equipment supplier that distributes gloves in North America. &#;It's just a matter that the gloves&#; manufacturers have said, 'This is our opportunity to make boatloads of money.&#;&#;

According to U.S. importer AmerCareRoyal and market analysts, the global demand for gloves nearly doubled in a matter of months from 300 billion pieces in to 585 billion in August . But glove makers can only produce 370 billion a year&#;and while new capacity installed in will add about 50 billion more, that still leaves a shortfall of 165 billion gloves as the pandemic rages.

Benefiting the most are the Malaysian glove producers who together control nearly 60% of the North American market. Top Glove, the world&#;s largest maker of gloves, posted record revenues of $1.8 billion in , up 51% from a year earlier, more than tripling the net worth of its billionaire founder Lim Wee Chai to $4.1 billion. The mania has also generated new fortunes in unlikely places: In Poland, Wieslaw Zyznowski, a 56-year-old, mild-mannered philosophy Ph.D., is now worth $670 million. Shares in his Warsaw-listed glove manufacturer Mercator Medical, which makes its gloves in Thailand, are up 3,300% since January .

Zyznowski founded Mercator at age 25 in , when Poland held its first free elections in decades. &#;It was such a wild time,&#; he says. "Nobody knew what it meant to run their own company.&#;

&#;We believe the demand will increase tremendously even after the pandemic disappears,&#; says Zyznowski, somewhat hopefully, &#;because billions of people became aware of the need for gloves.&#;

Thanks to cheap labor and a quirk of geography&#;natural rubber and the chemicals that make synthetic rubbers like nitrile are mainly produced in Asia&#;the glove market is dominated by companies in Southeast Asia. That means it&#;s nearly impossible for countries outside the region to make enough gloves domestically, as they did for masks and gowns. In the U.S. the Biden Administration aims to produce more than a billion gloves a month by the end of , but that will only satisfy half of domestic demand. And almost no one, from market analysts to health officials, expects the madness to end anytime soon: Prices are still rising in even with vaccination campaigns under way around the world.

&#;Every single month, the price of gloves has gone up. It&#;s a nice moneymaking opportunity if you&#;re a manufacturer,&#; says Levitt.

On a video call from his home in Wieliczka, a historic town with cobblestone streets in southern Poland, Zyznowski seems as surprised as anyone else at his newfound wealth. He and his brother Piotr set up a business that sold paper and printing machines in and they kept adding products as needed by the nascent Polish free market. Wieslaw took over the medical distribution business Mercator Medical in , which primarily supplied gloves. He then took the unorthodox step of embarking on a nine-year leave of absence from day-to-day operations to pursue a doctorate in philosophy.

Despite his studies, Zyznowski still held sway at the company: In , he convinced the board to get into the manufacturing business and buy a small glove maker in Thailand. Back at the helm in , he decided to double down on the glove maker that Mercator had purchased in . He eventually moved to Thailand for more than a year to supervise the construction of a new nitrile glove factory.

&#;Malaysia is much more established, but because of the pandemic, Thailand has a booming glove industry and new companies are entering the market,&#; he says.

Rubber Barons

The global rush to buy gloves has created new billionaires and centimillionaires in Malaysia, Thailand and Poland.

Zyznowski chalks up his company&#;s blistering success in the stock market over the last year to a combination of high demand and good luck: Malaysia imposed a partial lockdown in the second half of March that forced glove makers to keep half of their workforce at home. Thailand remained open and its currency weakened, boosting the fortunes of its glove manufacturers just as countries in Europe faced the first wave of the virus and frantically scrambled to buy more gloves.

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Last February Zyznowski was worth $35 million. Now, he is worth nearly 20 times as much thanks to a banner year for Mercator Medical&#;the firm recorded a $259 million profit on $497 million sales in , a staggering change of fortune from $146 million in revenues and a small net loss in .

For all of its recent success, Zyznowski&#;s Mercator Medical is a minnow in the glove world: the firm makes more than three billion gloves a year, compared to 93 billion for the industry leader, Top Glove. Many of the bigger players, including Wong Teek Son, the cofounder of a Malaysian glove maker that produces 10.5 billion gloves a year, are quick to blame higher raw material costs for higher glove prices. Wong started Riverstone Holdings in when he left his job as a chemist at a larger glove manufacturer, striking out on his own to make gloves for the electronics industry. Asked about the potential for profiteering during a global health emergency, Wong counters that the price of nitrile rubber has increased by 250%, from about $850 a ton in March to anywhere from $2,000 to $4,500 a ton in December, depending on the supplier. Data from commodities consulting firm S&P Global Platts backs this up, showing a twofold increase in the prices of acrylonitrile and butadiene&#;the two chemicals needed to make nitrile rubber&#;between March and December. But, of course, glove prices are up far more, tripling since the spring and rising more than tenfold over the past 12 months.

Certain nitrile gloves fetch up to $45 for a box of 100. "Long-term customers are willing to accept a higher price and spot buyers are coming in to offer extremely high prices,&#; says Riverstone&#;s Wong Teek Son.

&#;The cost base has not changed much. This must have led to a huge increase in margins,&#; says Tomasz Rodak, an analyst at Poland&#;s BOS Bank. Adds Stephanie Cheah of Hong Kong brokerage firm CLSA: &#;Raw materials are typically 50% of the glove cost, but if you&#;re raising your prices by 20% to 30% every month, the cost of raw materials is not going to catch up anytime soon.&#;

Those high prices also created opportunities for scammers and unscrupulous vendors.

&#;There&#;s a scam out there where people will say, 'I have a million boxes of gloves at a fairly attractive price.' And then you start going down the road with them, and all of a sudden they either go dark, or they'll say, &#;Oh, you've got to pay this company in Cambodia,&#; or wherever,&#; says Levitt of Levitt-Safety. &#;People have figured out that they can use nitrile gloves to launder money."

Most glove makers don&#;t sell directly to healthcare providers, instead working with intermediaries such as Levitt&#;s firm and larger outfits like Texas-based medical distributor McKesson, who then sell to customers in their home countries. These suppliers now find themselves squeezed between relentless price hikes from manufacturers and soaring demand from their clients, often faced with requests from glove makers to pay 50% for an order up front or pay a higher &#;spot&#; price for faster delivery.

On the websites of many glove manufacturers, fraud alerts pop up, warning visitors to contact the company before buying from agents who claim to represent them. At the Community Hospital of the Monterey Peninsula, a hospital located near the wealthy enclave of Carmel-by-the-Sea in California, officials in charge of sourcing personal protective equipment (PPE) held conversations with the FBI early in the pandemic to avoid buying from fraudulent vendors. With the hospital and its affiliated facilities burning through nearly 30,000 gloves a day&#;ten times the rate before the pandemic&#;the cost of receiving any shipment of fake gloves would be high.

&#;Every single month, the price of gloves has gone up. It&#;s a nice money-making opportunity if you&#;re a manufacturer.&#;

&#;We've probably received 300 different calls and emails trying to sell us PPE," says Doug Clark, director of supply chain services at Montage Health, the nonprofit healthcare group that runs the hospital. "It would be nice if the CDC would put out the companies that they have determined through the FBI that are fraudulent."

Some states have shared information with each other on approved vendors to avoid buying fake gloves. But that cooperation hasn&#;t prevented them from competing for the same limited supply.

"The whole world is looking for gloves,&#; says Bob Mauskapf, director of emergency preparedness at the Virginia Department of Health. &#;We're probably in competition with Wisconsin, the federal government, the private sector.&#;

&#;In March and April, prices for everything soared, and then through the summer some of those prices went down back to normal, but glove prices stayed high,&#; says Matt Damschroder, who leads Ohio&#;s Department of Administrative Services. &#;We don&#;t have as many as we&#;d like to have. Because the U.S. is importing, that's created a huge challenge.&#;

New virus variants and the slow vaccination rollout have almost certainly extended the life of the Covid-19 pandemic into . That means the need for gloves is set to continue, and the glove tycoons will keep cashing in as demand remains high.

Wieslaw Zyznowski knows it won&#;t last forever. &#;This is our five minutes of fame,&#; he says.

*Lim Kuang Sia is the founder of Kossan Rubber but shares his $1.2 billion fortune with his four brothers. An earlier version of this story incorrectly credited him with the entire fortune. &#;Ed

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