Johnson Matthey 2013 interim report notes higher demand in Europe.
The latest Johnson Matthey interim report for platinum and platinum group metals has revealed that gross demand for platinum’s use in jewellery is set to total 2.74 million ounces in 2013, with gross demand across all industry to reach a record 8.42 million ounces and demand from jewellers set to match 2007 levels in Europe.
The report states that platinum demand has been lifted mostly by strong recovery in sales to industrial users and unprecedented offtake by investors, however there has been a slight fall in terms of purchases by the jewellery sector.
According to the report, platinum supplies have recovered "only very modestly" from last year’s steep decline, and there has been little overall growth in recycling of the white metal, meaning the market is set to move further into deficit.
In terms of global supply, platinum is expected to rise by 2% to 5.74 million ounces in 2013, with higher output in Zimbabwe contributing most of the increase.
The interim report outlines that sales of platinum to Chinese jewellery makers will ease slightly this year after a very strong performance in 2012, but this will be partly offset by higher demand in Europe, North America and India.
Worldwide, gross jewellery demand is expected to total 2.74 million ounces, down 1% compared to 2012. In China, the impact of the significant fall in gold price in April and for much of the first nine months of the year has resulted in a sharp increase in retail footfall from consumers primarily interested in purchasing gold, and Johnson Matthey says this has had "a positive spill-over effect on sales of platinum jewellery" across China.
In other regions, it is forecast that consumption of platinum in jewellery will rise by 7% to 90,000 ounces in 2013. In Europe, demand will recover to 2007 levels, driven by the increased use of platinum in luxury watch cases, at the expense of yellow and rose gold.
The North American market has also shown recovery for platinum demand in jewellery, though the report states that offtake remains well below pre-economic crisis levels. By the end of 2013, purchases of platinum by the North American jewellery trade are expected to rise by 11%, driven by rising exports and higher domestic sales of platinum bridal rings in lower price categories.
These sales are a result of closing gap between the retail price of white gold and platinum during the past year: according to the report a platinum ring currently sells for only about 20% more in the North American market than the equivalent product made of 18ct white gold.
In terms of palladium, supply is set to fall owing to an absence of Russian stock sales. Higher demand for use in the auto sector will offset a fall in demand for jewellery. Palladium jewellery continues to lose market share in China, and the report notes that the metal has "failed to establish a substantial foothold in any other market".
As a result, the slide in jewellery offtake for palladium will continue in 2013, with demand dropping to a 10 year low of 390,000 ounces.
Gross demand from the Chinese jewellery trade is set to fall to just 185,000 ounces in 2013, owing to the absence of effective marketing, combined with consumer perceptions that palladium jewellery is of mediocre quality and represents poor value for money.
China has also experienced dwindling consumer demand for the end product, which the Johnson Matthey report says has resulted in a steady decline in the number of manufacturers willing to produce and of retailers prepared to stock palladium items.
In other regions, purchases by the jewellery trade will be unchanged; however there has been some growth in demand for palladium jewellery, albeit from a low level and mainly concentrated on North America, where the metal has a more substantial palladium jewellery market, but the metal is positioned against much less costly base metal products, rather than gold or platinum.
Jewellers in the US are expected to use slightly more palladium in white gold alloys this year. Sales of gold jewellery grew by 5% in the first half of 2013 in the US, as a result of a strengthening economy and greater availability of inexpensive gold jewellery in lower purity alloys.
In terms of jewellery recycling, platinum has experienced a decline in 2013, while palladium recycling has increased. The only available data in the report, focused on China and Japan, shows that platinum recycling in China is likely to decline by 17% in 2013, to 500,000 ounces, representing about 27% of gross jewellery demand in this region.
Falls in the local platinum price in China, particularly in Q2 and Q3, reduced the value of old jewellery and therefore negatively impacted the incentive for consumers to exchange existing designs in platinum for cash or newer pieces.
Recovery of palladium from Chinese jewellery scrap is forecast to drop by 6% this year, to 165,000 ounces. Retailers and manufacturers have also continued to recycle large quantities of unsold stock in China, while higher palladium prices have encouraged some consumers to return old palladium jewellery items.
In Japan, platinum jewellery recycling it set to decline by about 7% to 265,000 ounces in 2013, despite a significant rise in local platinum prices. The gold price has also been an important driver of jewellery recycling in Japan, and a decline in the yen price has impacted scrappage rates for all jewellery metals.