Gross platinum jewelry demand in North America is poised to increase by 45,000 ounces to 180,000 ounces in 2010—an increase of 33 percent over 2009—thanks to improved economic conditions, an increase in discretionary spending on jewelry, and healthier exports to Asia. These factors are offsetting high prices, which have hovered around $1,500 an ounce since the beginning of the year.
This news comes courtesy of Johnson Matthey’s Platinum 2010 Interim Review, which was released Nov. 16 and presented to journalists representing the jewelry, electronics, and automotive industries at the Four Seasons Hotel in New York City. The 40-page survey covering platinum group metals supply and demand is issued free of charge by Matthey, which tracks the production, supply, and use of platinum and related group metals. The report includes gross demand and recycling data for the jewelry sector, and is a forecast of how the group sees the market for the whole of 2010, as well as an outlook for the year ahead. Year-over-year figures are also compared to provide a price forecast for the next six months.
Mark Danks, Ph.D., sales and marketing manager, Platinum Jewelry Products North America with Johnson Matthey, told JCK that while many mid- to high-level jewelers in North America are doing well with platinum, overall economic concerns may hinder further spending. “Up to JCK Las Vegas last year, the market was pretty bullish,” he explained. “The biggest challenge is getting [platinum jewelry] into stores.” Help exists in the form of the group’s newly launched Platinum Design Competition, and in exports to China, which are helping to boost demand for some American manufacturers. One caveat: “Platinum manufacturing is suffering in men’s wedding bands because there’s so much competition,” he added.
After reviewing the report, here’s what JCK has learned about projections for the platinum and palladium markets in the coming months:
- Globally, gross demand for platinum in the jewelry sector is predicted to fall by 14 percent in 2010 to 2.42 million ounces as retailers and consumers reduce purchasing in response to relatively high prices. Recycling of platinum jewelry is expected to increase by 30 percent to 735,000 ounces. As a result, net platinum jewelry demand is expected to fall by 25 percent to 1.69 million ounces. High platinum prices are also expected to reduce gross global platinum demand for jewelry fabrication by 390,000 ounces in 2010. Platinum traded higher in the first nine months of the full year, thereby lowering the wholesale purchasing of platinum in the jewelry sector, particularly in the price-sensitive Chinese market where full stock levels and reduced consumer spending are expected to impact demand.
- · Additionally, gross demand in China is expected to fall by 430,000 ounces to 1.65 million ounces. Higher platinum prices have triggered reduced purchasing by wholesalers and retailers, with heavy buying occurring only when platinum’s price dips below $1,500. Evidence suggests that full stock levels—a result of slow 2009 sales—have also reduced new gross demand in China. Elevated price levels have encouraged greater scrapping of old platinum jewelry, raising recycling levels by 36 percent, and contributing to a reduced net demand of 1.2 million ounces.
- In Europe and Japan, platinum jewelry demand is expected to soften by a relatively modest 10,000 ounces. Reduced consumer spending has affected jewelry purchases in Europe, though the bridal sector in the U.K. is expected to remain resilient. Last year’s figures for platinum jewelry in Japan have been revised downward to 335,000 ounces, due to a reassessment of the impact of the recession on demand for fashion jewelry. Gross demand from the Japanese jewelry market is forecast to soften by a further 5,000 ounces in 2010 as recession and high platinum prices continue to affect the industry. Purchases of Kihei chain, bought by some consumers as an investment, are expected to hold up well in 2010.
- Worldwide recovery of platinum jewelry is projected to increase by 170,000 ounces to 735,000 ounces. This includes old jewelry that consumers have traded in as well as unsold retail and wholesale stock. Recycling in the Chinese and Japanese jewelry sector is expected to be particularly strong as consumers recycle old pieces.
- The Matthey team, including North America market research manager Ellen Zadoff, noted that most jewelry recycling takes place in China, and has grown popular in Japan only in the last five years when metal prices rose. North Americans, on the other hand, “generally don’t cash in their jewelry,” according to Danks.
- Meanwhile, overall demand for palladium jewelry is expected to fall along with the consumer rate of consumption due to metals prices and an increase in recycling.
- Gross palladium jewelry demand is set to soften by 145,000 ounces in 2010 to 630,000 ounces—the fall almost entirely due to reduced consumption in China. Recovery of palladium from recycling of old jewelry is set to increase by 15,000 ounces to 85,000 ounces, bringing net palladium jewelry demand to 545,000 ounces and representing a 23 percent drop compared with 2009.
- Gross demand for palladium jewelry manufacturing in China is expected to fall by 160,000 ounces to 400,000 ounces in 2010. With the exception of a few provinces, availability and promotion of palladium jewelry is sparse and has struggled to maintain consumer interest. Several manufacturers have withdrawn from palladium jewelry production in 2010 while others are using increased quantities of recycled old jewelry.
- In Europe, however—particularly in the U.K.—palladium jewelry is anticipated to grow in popularity. The demand for palladium for use in jewelry manufacturing in Europe will strengthen by 20,000 ounces, while holding steady in the United States and other regions.
- Finally, recycling of palladium from jewelry is expected to increase 21 percent by year’s end, even though many Chinese retailers are less willing to exchange old pieces of palladium jewelry than they are gold and platinum.