High platinum prices slow demand for jewelry

Worldwide demand for platinum used in jewelry fabrication is forecast to slip by 13% to 2.45 million ounces by the end of year primarily due to the rising spot price and high investor demand of the precious metal, Johnson Matthey says in its Platinum 2003 Interim Review published Tuesday.

Within the next six months the price of platinum could trade between $700 and $820, reaching 23-year highs, Johnson Matthey says in its report.

Overall, demand for platinum continues to exceed supply by 480,000 ounces, the report says. Total supply for the precious metal is projected to rise just over 2% to a record 6.11 million ounces, mainly due to producers raising output in South Africa.

In reaction to the rising price, purchases of the precious metal for jewelry fabrication in China is projected to fall by 18% to 1.295 million ounces, Johnson Matthey says. This will be the first drop in more than decade for the emerging economic power.

In Japan, an uncertain economy with consumer spending on luxury items under pressure will cause jewelry manufacturers to cut by platinum purchases by 15% to 665,000 ounces, Johnson Matthey says. More of the precious metal will be recycled from inventories, notably from the liquidation of stock from companies that have gone out of business.

These events will “greatly outweigh a small improvement in platinum demand in the U.S. jewelry market,” Johnson Matthey says in its report.

Indeed, platinum demand for jewelry in North America is forecast to rise by 5% in 2003 to 325,000 ounces, Johnson Matthey says. In Europe, jewelry demand for platinum is predicted to rise by 3% to 165,000 ounces.

Meanwhile, demand for palladium in jewelry alloys is expected to drop by 6% to 245,000 ounces, again due largely to lower production of platinum jewelry in China and Japan, Johnson Matthey says.

Overall, the price of palladium is expected to hold between $140 and $220. Supplies will outweigh demand resulting in a projected surplus of 670,000 ounces, Johnson Matthey says. The total supply is expected to surge by 20% to 6.32 million ounces in 2003, largely due to a revival in Russian sales.