Double-digit growth in Indian platinum jewellery will partially offset reduced consumer spending and competition from low-karat gold jewellery in China, leaving total platinum jewellery demand down by an expected 2% to 2,405 koz for 2018, according to the Platinum Quarterly report published by the World Platinum Investment Council (WPIC).
Jewellery demand for platinum in the third quarter of 2018 was 580 koz, down 10 koz from the previous quarter and flat year-on-year. A surprisingly weak quarter for China offset the year-on-year growth in other regions, which mainly came from the US and India.
Demand from Chinese jewellery manufacturers declined 9% yearon- year for the quarter. Purchasing of platinum on the Shanghai Gold Exchange by jewellery end-users fell at a double-digit rate year-on-year in Q3 2018 and this was an even sharper drop than that seen in H1 2018.
However, high platinum imports to China and Hong Kong suggest additional purchasing through other channels. This is in contrast to the overall Chinese jewellery market: major players Chow Tai Fook reported 6% and 23% same store sales growth for mainland China and Hong Kong & Macau, respectively, while Luk Fook reported 4% and 17% for the same metrics. Official statistics for jewellery retail sales growth indicated a change of 11% and 13% year-on-year for the mainland and Hong Kong, respectively, in the third quarter of 2018. Chinese jewellers also continued to highlight the shift of consumers to fashion jewellery which is less commonly priced by weight, although in this category the focus is currently on lower carat coloured gold jewellery.
In Japan, the local market for platinum has been lifted by the low platinum price which consumers there view as a buying opportunity, although this has not been fully reflected in manufacturer demand in Japan as production for export has declined due to lower Chinese platinum jewellery demand.
The overall Indian jewellery market has been soft in the third quarter of 2018 owing to the weak rupee but platinum demand continues on its upward trend. Strong economic conditions in the US, and the combination of lower platinum prices with a steady $400/ oz discount to gold in Q2 2018 and Q3 2018, have contributed to strong platinum jewellery demand growth, while growth in Europe has been more muted, WPIC noted.
Jewellery consumption is growing in most regions, but the ongoing decline in China, which is the largest market, is expected to result in a 2% drop in global jewellery demand to 2,405 koz.
Jewellery recycling is set to be 500 koz in 2018, a fall of 11% (-60 koz). The slowing Chinese platinum jewellery market and low platinum prices in both China and Japan have been the main forces behind this decline. The weakness of recycling in Q3 2018 and the lower forecast for Chinese jewellery demand have led to a downward revision (-5 koz) in the annual forecast.
Platinum jewellery demand is predicted to drop 2% (-55 koz) in 2018 to 2,405 koz. The decline in Chinese jewellery demand in Q3 2018 has led to forecast annual demand for the region being lowered and it no longer seems likely that platinum jewellery demand will start to level off. Additionally, the risk to the total jewellery industry is of a slowdown: jewellery retail sales growth in mainland China slowed to 5% in October from 11% in September and total retail sales growth dropped to the second lowest level in 15 years.
Consumers are being cautious due to ongoing trade tensions with the US and a slowdown in the economy, as indicated by the four consecutive months of year-on-year decline in passenger car sales (as of October), and this could expand to luxury goods in Q4 2018.
India and North America are expected to contribute the most growth to platinum jewellery demand in 2018, the latter being revised up marginally due to a good economic environment which resulted in strong Q3 2018 platinum jewellery demand and improved expectations for the final quarter of the year.
The Indian rupee continues to weaken and could be a headwind going into Q4 2018 but is more likely to affect gold jewellery demand. Western Europe and Japan are both predicted to see low single-digit growth as the yearon- year fall in the platinum price induces some demand growth in what would otherwise be relatively flat markets.
Jewellery recycling is forecast to decline by 20 koz to 480 koz in 2019 owing to a low platinum price and a further contraction in the Chinese platinum jewellery market.
Outlook
Platinum jewellery demand is estimated to grow 1% (+25 koz) to 2,430 koz in 2019, which would make it the first year of growth since 2014.
Chinese demand is expected to continue its decline, albeit at a slower rate, as platinum struggles to find its place in a changing market where the trend towards jewellery pieces for daily wear and purchases by younger consumers are becoming increasingly important.
This fashion trend is likely to involve a move away from weightbased pricing to design-led pieces, which are priced by piece, leading to less metal demand for the same level of retail spending. Furthermore, the downward trend in the platinum price means that consumers are aware that their purchases of platinum jewellery may not hold their value.
However, the slower rate of decline in China and the anticipated growth in all other regions, which are largely expected to continue their trends from 2018, lifts global demand, resulting in a positive year-onyear change.