Global Platinum Jewellery Demand Grew In 2011
Gross platinum jewellery demand rose by 2% in 2011 to 2.48 million ounces, according to Johnson Matthey in “Platinum 2012”, released today. Growth came mainly from the jewellery trade in China, where demand reached 1.68 million ounces and also in India, where platinum jewellery demand increased rapidly from a low base.
Platinum jewellery demand in China rose by 2% to 1.68 million ounces. Demand in China remained robust in the first half despite higher prices than in the previous year. In the second half, when platinum prices dropped and gold began to trade at a premium to platinum, there was a surge in buying by Chinese manufacturers, raising gross platinum demand. Chinese manufacturers once again purchased very efficiently into price dips, with record purchasing in late September 2011 after platinum fell sharply in price. Downward movement in the platinum price helped improve margins for manufacturers and partly offset rising labour costs and tight credit, making it more attractive to produce platinum jewellery.
Demand for platinum in the Japanese jewellery sector softened slightly. Gross demand declined by 3% to 315,000 oz as the impact of the Great East Japan Earthquake was felt together with long-term population and social trends. After an initial period of subdued demand following the disaster, manufacturers and retailers reported higher sales in the bridalsector and as lost jewellery was replaced. Sales reverted to more normal levels in the second half as trends towards later and fewer marriages re-emerged.
Platinum jewellery demand in North America increased by 6% to 185,000 oz. High-end manufacturers continued to be extremely busy meeting export as well as domestic demand for platinum jewellery pieces. The expansion of brand-name jewellery retail outlets overseas, particularly in fast-growing emerging markets, was positive for demand in North America. In terms of domestic demand, successful marketing of platinum engagement and wedding rings to young couples helped sales of bridal jewellery against an overall backdrop of falling marriage rates.
Supported by the bridal sector, platinum purchasing by the trade in Europe remained solid at 175,000 oz. Consumer confidence remained low in many parts of Europe and spending on jewellery items generally decreased. However, purchases of platinum in the bridal sector were resilient and lower prices in the fourth quarter encouraged some consumers to ‘trade up’ from white gold to platinum for wedding and engagement rings. European luxury brands continued to do very well in the high end of the market, boosting demand for platinum used in the manufacture of jewellery and watches.
Purchases of platinum by the jewellery sector in India grew by a third to 80,000 oz. An increase in retail outlets offering platinum and rising consumer purchases drove platinum jewellery demand up to record levels in India. Although India remains overwhelmingly a gold market, from a low base platinum is becoming more popular with the rapidly growing middle class and several retailers are opening new stores in key Indian cities and are actively promoting platinum jewellery collections.
Recycling of platinum jewellery increased by 10% to 810,000 oz in 2011. In China, 455,000 oz of platinum was returned for recycling last year, a similar level to that in 2010. Higher average metal prices stimulated greater returns of old pieces by consumers but strong retail demand minimised the level of redundant stocks being scrapped by manufacturers and retailers. In Japan, recycling of platinum from the jewellery sector increased by 70,000 oz to 350,000 oz, the highest since 2008 as high gold prices encouraged the trade-in of a range of precious metal jewellery.
Platinum jewellery demand is forecast to see further momentum in 2012. The strength of platinum jewellery demand this year will partly depend on consumer interest in China as manufacturer and retailer stocks built up in late 2011 and early 2012 are drawn down. Hong Kong jewellery brands continue to expand retail operations in mainland China, creating opportunities to increase platinum jewellery sales.
PALLADIUM JEWELLERY DEMAND FELL IN 2011 DUE TO HIGHER PRICES
Purchasing of palladium by the global jewellery industry declined by 15% to 505,000 oz. Palladium continued to suffer from a lack of positioning in the key Chinese market. In Europe and North America, the price elasticity of demand was demonstrated – palladium traded on average 39% higher than in 2010, leading manufacturers to offer lower weight and lower fineness palladium alloys to meet retail price points, and increasing the exposure of palladium to competition from cheaper alternatives.
Gross demand for palladium in the Chinese jewellery sector fell by 55,000 oz to 305,000 oz last year. A lack of market push and limited consumer pull resulted in purchases by the jewellery sector in China softening once again. Palladium demand has in addition been susceptible to price volatility; prices were on average 33% higher in RMB terms than the previous year, further eroding interest in the metal. Due to low volumes, some manufacturers and retailers exited the palladium market in 2011.
Demand in Europe weakened by 8% to 60,000 oz in 2011. Rising palladium prices and reduced spending on luxury goods impacted the jewellery sector in general last year. Manufacturers in Europe moved to lower piece weight and lower fineness alloys to meet retail price points, therefore lowering purchasing of palladium by the trade. Palladium continues to be popular in men’s wedding bands where it is being positioned as an alternative to white gold.
Japanese demand for palladium from the jewellery trade softened by 7% to 70,000 oz. Despite some disruption in the jewellery sector in the aftermath of the March earthquake, the use of palladium as an alloying agent in platinum and some white gold jewellery was fairly robust.
Gross demand for palladium in the jewellery sector in North America fell by 31% to 45,000 oz. High unemployment and subdued economic growth meant that 2011 was a difficult time for much of the jewellery market. Sales of palladium jewellery were on the decline due to elevated prices and palladium was challenged in its stronghold, the men’s jewellery market, by cheaper non-precious alternatives.
Palladium jewellery recycling increased to 210,000 oz last year. Palladium jewellery recycling in China more than doubled in 2011 to 190,000 oz. Compared to
platinum, a higher proportion of palladium recycling tended to come from unsold retailer stock and manufacturers’ inventories.
Lower palladium jewellery demand is forecast in 2012. Palladium demand in the jewellery industry can be expected to fall this year if consumer awareness remains limited by a lack of effective marketing particularly in China, the biggest market. Demand in Europe and North America should be firm as palladium holds on to its share in niche markets.
Source: Platinum Today