South African Platinum Unrest Worries Indian Jewellers
The recent labour unrest in South Africa’s platinum belt has got platinum jewellery retailers in India worried. Jewellery demand is set to drop off if prices rise significantly, they say.
And, though retailers insist that Indian consumers would not be swayed by across-the-counter prices going up by 3%, anything more than that would definitely diminish demand in the country.
On the other side of the coin, the lack of visibility about what will happen to the industry longer term has retailers worried that the after-effects could well proceed into 2013. For now, most are relying on their current stock to temporarily ride over the crisis. But, there are some that are worried about a supply shortage.
For the platinum jewellery sector, India is already an established market, particularly the southern region, with Chennai and Bangalore being the two most important markets. There are over 300 stores at present in India which retail platinum jewellery. And in recent months, many customers have been preferring platinum to gold because of the yellow metal’s current high prices .
“Every time the price of gold rallies and hits a new key psychological level, jewellery demand for the yellow metal is impacted,” said Santosh Maghani, bullion retailer. “There is a clear switch to platinum jewellery at such times. But, with supplies drying out from South Africa, platinum has already hit a two-month high,” he added.
According to Orra CEO Vjiay Jain, if the SA mine trouble continues for long, it would then lead to real uncertainty in the supply of the metal, sending prices shooting. This year, jewellers were expecting an 18% to 20% year-on-year growth in platinum jewellery sales. But, he adds, the strike could impact demand in India.
The jewellery sector holds a prominent position for the white metal. Platinum jewellery consumption rose by around 50% in 2011. There is also a strong demand from industrial and automobile segments and the metal is a popular choice for investments too. India imported 15 tonnes of platinum in 2011 and jewellers expect imports to rise to 22 tonnes in 2012.
Retailers said consumer’s familiarisation and knowledge of platinum has grown several fold. “It is not just platinum jewellery for women that has got acceptance in India. Men too have their own brand now and sales have surged. We will have to wait and see if the unrest really goes on for a long time to severely impact demand,” said Aditya Jha, precious metal retailer.
He added that the belief in platinum is growing stronger and that consumers understand and prefer to have high quality diamond jewellery set in platinum these days and not in gold.
Though fears persist, many analysts still expect there to be a surplus this year. Nihal Shah, an analyst at Credit Suisse, is of the opinion that the market still looks `oversupplied by circa 250,000 to 350,000 ounces in 2013-14′ and automotive production is the `key demand variable’.
Shah said there was also a risk that Marikana would hit platinum’s second biggest market. “The brand image of platinum is one of a luxury, aspirational jewellery product. It seems possible, if not probable, that the scenes reported from South Africa will have at least a temporary effect on the appeal of platinum in the country,” he added.