Platinum Jewelry Demand Declined 18% in 2006

A dramatic increase in the amount of recycled platinum being used for jewelry along with high prices led to an 18 percent decline in worldwide demand for newly mined platinum in 2006, according to Johnson Matthey’s annual report on platinum group metals. The decline occurred in all regions.

By weight, platinum is believed to be only marginally down compared to 2005, the London-based company said in its Platinum 2007 report. The company—which tracks supply, demand, and use of platinum and platinum group metals; and is a platinum groups metals refiner—released its report Monday at a meeting in New York City. Its main activities include the manufacture of autocatalysts, platinum process catalysts, and specialty chemicals; and the refining, fabrication, and marketing of platinum-group metals.

New platinum for jewelry totaled 1.61 million ounces in 2006, down from 1.97 million ounces in the prior year.

In the United States, platinum demand for jewelry fell by 13 percent (240,000 ounces) due to price-point driven retailers importing from lower-cost production centers and increased ordering of white gold items to replace their platinum jewelry stocks, the company said. Platinum jewelry in the bridal and luxury markets remained “fairly strong” for the year.

B.J. Williams, Johnson Matthey marketing manager, Jewelry North America, told JCK after the meeting that platinum remains popular with consumers and encourages retailers to make platinum jewelry available at their stores

“Consumers love platinum,” he said. “But they need to be able to see platinum jewelry on display in order to buy it.”

The majority of platinum jewelry recycling occurs in Japan and China. Demand for platinum from Chinese jewelry manufacturers fell by 13 percent to 760,000 ounces, the lowest level since 1998, Johnson Matthey said. It’s a common practice among Chinese consumers to trade in their old jewelry for new jewelry. The high cost of platinum has increased this practice. Old platinum, including unsold stock returned by retailers, may represent a quarter of all platinum jewelry being manufactured in the country, John Matthey estimates.

In Japan, high-metal prices and a weak yen led to a 29 percent decline (to 360,000 ounces) in jewelry demand for the precious metal, Johnson Matthey said. Platinum jewelry being sold in pawn shops is finding its way back into the manufacturing process.

The European platinum jewelry market was less affected by the high cost of the precious metal than other markets, but demand for platinum still fell 10 percent to 175,000 ounces.

Palladium. Demand for palladium from the jewelry sector in 2006 fell 30 percent from the prior year to 995,000 ounces. China accounts for more than three-quarters of the world consumption of palladium jewelry and it here that demand in 2006 fell 37 percent to 760,000 ounces. Much of the cause for this was exceptional demand in the previous two years to fill the counters of Chinese retail shops has now fallen more in line with consumer demand, Johnson Matthey said. Also, new metal demand was further reduced by recycling.

Palladium was test-marketed in the U.S. in 2006 and further marketing of the precious metal is expected for this year. Johnson Matthey officials told JCK that retailers and consumers need to be more educated in the benefits of the precious metal in jewelry before it has a significant market impact.

Supply and Demand. Overall global demand for platinum rose 1.2 percent to 6.78 million ounces in 2006 due to an increase of the precious metal for automotive autocatalysts and other industry applications, which more than offset the decline in jewelry demand. For the first time in eight years, global supply outpaced demand, with a surplus of 10,000 ounces for 2006, Johnson Matthey said.

Meanwhile, world demand for palladium (which is also used for autocatalysts and other industrial applications) fell by 10 percent to 6.64 million ounces, after five years of growth. Overall, the palladium market had a surplus of 1.4 million ounces in 2006.

2007 Outlook. “We are anticipating that supply will grow faster than demand, leaving a surplus,” said Ellen Zadoff, Johnson Matthey Market Research Manager North America.

However, she added that demand for autocatalysts and industrial applications will continue to be strong and investment demand will continue to drive up price of the precious metal to trade between $1,200 and $1,400.

For palladium, although Zadoff said the market fundamentals are weak, such as continued large surpluses, there is still investor interest, which will likely drive prices between $320 and $420 for 2007.