Is palladium, with assay figures up 17.8%, the recession-proof metal?
It has been four years since palladium was afforded an official hallmark and with assay figures up 17.8% for the metal in 2012, it appears demand for palladium is booming. Kathryn Bishop reports on the metal’s recession-proof price and the discussions raised by palladium 500.
The recent Johnson Matthey Platinum 2013 report revealed an interesting fact about palladium. While the rest of the world’s palladium jewellery demand is stagnant or declining here in the UK the appetite for the metal is reaching an all-time peak.
UK hallmarking figures for 2012 released by the Birmingham Assay Office show that the striking of palladium hallmarks jumped 17.8% last year, with the hallmarking of the lower fineness palladium 500 (Pd500), which has 50% palladium content, increasing 190%.
So what is it about this metal – the ‘newest precious metal’ as it is dubbed – that has made it so appealing in recent years?
PRECIOUS METAL PRICING
The changing pace of the gold price has been inescapable for the industry and consumers alike and the metal has priced itself out of reach of many shoppers. Pair that with the volume of UK brides opting for platinum wedding and engagement rings – Johnson Matthey’s platinum report describes the metal as retaining “a strong position in the bridal sector” in the UK – and palladium has managed to get its foot in the door.
The white metal offers brands and manufacturers a chance to create pieces with both an attractive weight and price point, as well as positive margins.
“Palladium jewellery has established a niche in the UK market mainly for men’s wedding bands,” states Johnson Matthey general manager for marketing Jeremy Coombes. “This is a highly price-sensitive category in the jewellery market. We know from consumer research that the purchase of the man’s wedding bands is often left to the last minute.”
This last-minute rush can leave men with a tighter budget to work with and as a result palladium becomes the most viable precious metal choice.
“A 950 palladium ring is not only price competitive with the white gold alternative but offers a much higher purity and if the bride is wearing platinum the man’s ring is in palladium it has the reassurance of being made from the same family of metals as platinum,” Coombes explains.
Brown & Newirth sales director John Ball describes the growth of palladium as a reaction to the recession. “[Palladium demand has grown] because we promote it harder in the UK” he states. “In Scandinavia, for example, they don’t understand it. 18ct gold is so prevalent there that distributors don’t want to promote it, but in the UK we’ve embraced it. Our recession started before a lot of mainland Europe and so a different price was required and palladium was a good option.”
Nottingham jeweller Temprell makes many of its designs in-house and palladium demand has surged in the last two years. “We’ve seen an increase in customers coming with palladium already in mind – they’ve done their research and chosen it as the most suitable metal for them,” explains Temprell’s Sophie Messom.
Messom notes that, as reported by many other jewellers, it is gents that are opting for palladium wedding bands to fulfil both a budget and, quite often, the desire for a ring with a wider profile.
Ball notes that palladium has become a popular alternative to white gold owing to its colour and fact it does not require rhodium plating. As a result the metal in its 950 fineness offers a sense of purity that rhodium-plated white gold cannot always provide.
While palladium is known for its porosity and casting problems, jewellery designer Lara Bohinc found that the metal was ideal for diamond setting when she last year created a high jewellery collection using palladium in collaboration with the International Palladium Board (IPB): “I think it is a very nice metal to use, especially for pavé setting because it is very strong and creates almost a vintage effect when set with diamonds. It is also great for earrings because it is lighter so you can make pieces bigger than in gold or platinum.”
At Temprell, its designers have found the metal to be slightly fragile when used for precious stone setting. “As a company we’re selective of the styles of gem-set, palladium rings that we manufacture as we feel the metal can be too brittle,” says Messom. “But it’s not such a problem with gentlemen’s wedding bands as they are [typically] machine spun, compressed, wrought metal.”
While Bohinc’s high jewellery line has price points hitting tens of thousands of pounds, due mostly to the scale of the designs and the precious stones incorporated, of interest is the lack of commercial jewellery made using palladium. One issue has been the fact that mass-producing palladium is not the easiest of processes due to porosity issues. As a result large manufacturers in China that have attempted to make wholesale collections in palladium have all but ceased their production. Demand for palladium in China itself has also been feeble. Last year alone falling production in China was the cause of a decline to 445,000 ounces in gross world demand for palladium for jewellery manufacturing.
According to Johnson Matthey there are a number of reasons why palladium jewellery has failed to establish a secure market position in China.
“The decline in demand for palladium on a global scale relates to the failure of palladium jewellery to gain widespread consumer acceptance in China, where it does not compete in the bridal market but was introduced as a cheaper alternative to platinum in fashion jewellery,” explains Coombes. “Low initial product quality followed by the erosion of retail margins as the palladium price increased over the years put it into disfavour with retailers and consumers alike, and the rising demand for platinum and yellow gold jewellery in China of late has prompted most jewellery manufacturers to concentrate on supplying these more saleable items.”
Indeed, for so long palladium has been promoted as platinum’s more affordable sister, with retailers often relating back to it being part of the platinum family while selling to consumers. But with gold and platinum prices closing in on one another in recent times and platinum becoming once more a viable option for consumers, have efforts to market palladium completely stalled?
Back in the UK Bohinc shares her thoughts: “I think it will take a bit longer for consumers to understand and appreciate the metal. It took almost a century for diamonds to get the status they now enjoy so it may take a while to build palladium’s reputation as a metal on par with gold and platinum.”
Indeed, the way in which jewellers are marketing palladium to their customers is key, as Charles Green’s head of design Pip Beale explains: “We are finding that shops do vary in their approach when selling palladium. Some retails are pushing the metal, whereas others only go to it as a last option.”
The desirability of the metal in the mainstream has also been called into question. In an ideal world palladium jewellery would be more widespread than the men’s wedding bands for which it has become ubiquitous. But does its grey colour make it less appealing to the female of the species? “Palladium is not unsexy, it is the newest precious metal and it needs more time and education,” explains Ball.
In store at Temprell, however, female customers selecting palladium are almost unheard of. “We don’t see many ladies with palladium diamond-set engagement rings so there’s a shortage in the sales of ladies palladium wedding bands,” states Messom.
There has been a rising debate among jewellery manufacturers, retailers and even the UK assay offices about the growth of palladium 500, or Pd500, which has a purity of 50% palladium. The main argument is that the metal is not deemed precious enough to be sold alongside 18ct gold and 950 platinum but its present popularity is unavoidable and the figures speak for themselves. In 2012 the end-of-year hallmarking figures for Pd500, collated from all four UK assay offices, revealed that the number of Pd500 articles hallmarked totalled 21,167, up 190% on 2011’s figures.
“Palladium 500 has gone through the roof,” states Birmingham Assay Office’s assay master and chief executive Michael Allchin. “[There has been] exponential increase in demand for this product, mainly wedding rings.”
On the subject of Pd500 manufacturer Charles Green, which hand makes all of its rings without the use of casting, says the metal is one it is keeping its eye on. “To date we have not stocked Pd500 as palladium 950 is doing well enough without muddying the waters with a new alloy that could confuse the public at this early stage,” states Beale.
Brown & Newirth on the other hand is supplying Pd500 rings to a number of UK jewellery retailers. “The reason we [provide Pd500] is because it’s requested owing to its price point,” explains Ball. “Palladium 500 goes against the grain of everything we do with precious metals but it is required. You can’t dictate what the market should sell. We can give advice, try to sell the finest metals, but we’re here to listen to the retailers who in turn listen to consumers.”
The metal’s lower price point and the issues with consumer understanding of palladium does risk positioning Pd500 in a separate realm to gold and platinum, something that has been noted. “I am not certain of the reason for [the rise in Pd500 demand] but I suspect that it is to allow palladium to compete against lower carat white gold and non-precious white metals such as titanium and stainless steel,” says Coombes. “The latter materials do inhibit sales growth for palladium bridal jewellery in the US, for instance.”
In the US palladium can be found bracketed alongside non-precious metals, especially when used for men’s wedding bands. This might not yet be the case in the UK, but Messom says the lower fineness of the metal does detract from its precious connotations: “For us, palladium 500, with such a low finesse, would not be considered fine jewellery.”
On the flipside there is the argument that 9ct gold, with only 37.5% gold content, is considered a precious metal and is used widely in manufacture and wedding bands. So why should Pd500 be treated differently? Allchin states his viewpoint: “Our traditional 9ct gold is only 375 parts per thousand, and 14ct gold 585 parts per thousand, so 500 parts per thousand palladium is fine for me.”
DRIVING PALLADIUM FORWARD
The UK jewellery industry has experienced an amount of palladium marketing such as the IPB’s work with high-profile fashion and jewellery designers like Lara Bohinc and this month’s cover star Hussein Chalayan, alongside its sponsorship of the British Fashion Council’s Rock Vault initiative. The Palladium Alliance’s 2011 campaign working with Vivienne Westwood and Central Saint Martins students also helped to grant the metal some cool points among young designers while positioning in front of consumers.
At a trade level, Charles Green last year ran its fifth annual student design competition using palladium, while the Crafts Council of Ireland has hosted a laser welding program where students created brooches using palladium.
The decline in UK marketing of gold and platinum from the World Gold Council and the Platinum Guild International, both of which have been focused on growth markets such as India and China, has opened up marketing prospects for palladium. While the IPB has yet to announce whether it has any marketing plans for palladium in the UK this year, Coombes believes the metal has managed to build its place in the UK jewellery industry without the need for large-scale promotion. “But it seems likely that without a properly co-ordinated consumer-focused campaign the size of the market may not increase much from this level,” he concedes. “We would look to primary producers of palladium to fund such a campaign, but in practice the candidates for this will be limited. South African platinum group metal mining companies are always likely to prioritise the promotion of platinum jewellery, since their principal mined product, in terms of both weight and value, is platinum.”
Allchin agrees with Coombes thatmore could be done. “All precious metals could do with some generic marketing [but] there’s an opportunity for the palladium suppliers to steal a march in our market.”
Arguably it is down to jewellery manufacturers themselves to keep the metal front of mind for retailers by working with it and providing the metal as premier precious option. And at a trade level, at least, it appears that palladium has already moved on from the world’s newest precious metal to retailers’ growing source of men’s bridal jewellery sales. Only time and 2013’s annual hallmarking figures will show whether palladium is more than just a recessionary remedy for jewellers.
This feature was taken from the June issue of Professional Jeweller. To read the issue in full online, click here.