OSE Derivatives

Executive summary

Jewellery is a key component of the platinum market, which today stands at around 25% of total demand. As recorded in WPIC’s quarterly supply and demand data series, platinum jewellery demand peaked at 3.0 Moz in 2014 before declining to 1.8 Moz in 2023.

This erosion was entirely due to declining demand in China, which had previously, and for many years, been the largest market for platinum jewellery, peaking in 2014 at 2.0 Moz of demand (figure1).

The platinum jewellery market decline now appears to have stabilised, with year-on-year growth of 5% estimated for 2024 and 2% year-on-year growth forecast for 2025, when total platinum jewellery demand is expected to reach 1,983 koz.

A key factor in the recovery of the platinum jewellery market is the scale of growth in demand outside of China over the last decade. This is estimated at 1.6 Moz in 2024 as compared to 1.0 Moz in 2014, which is now compensating for the loss of demand in China. Furthermore, China itself is showing signs of a recovery – albeit fragile – with a narrow return to growth forecast for 2025.

Figure 1. Platinum jewellery demand in China versus ex-China 2014-2025f

Source: SFA (Oxford) 2014-2018, Metals Focus 2019-2025f, WPIC research

In its latest two- to five-year forecast, WPIC expects platinum jewellery demand growth of 2.0% CAGR from 2023 to 2028 as these trends continue. Added to this, further upside is possible should platinum gain share from the estimated 1.7 Moz white gold market. For each 5% of white gold demand that is switched into platinum demand, this would increase total platinum demand by an incremental average of 100 koz or 1.3% of total demand p.a. through the years 2025-2028 (figure 2).

Figure 2. Platinum jewellery demand (koz)

Source: Metals Focus 2023 – 2025f, WPIC research thereafter

Platinum jewellery demand in China

The decline in platinum jewellery demand from 3.0 Moz in 2014 to 1.9 Moz in 2023 can be attributed to China (figure1); China’s platinum jewellery demand declined from 2.0 Moz to 0.4 Moz over the same period (-14% CAGR).

The China market has undoubtedly been affected by broader trends, such as declining marriage rates and changing consumer preferences as evidenced by stronger competition for discretionary spend from growing consumer spending in other areas, such as experiences (travel and dining) and on alternative luxury goods (cars, wine and art etc.).

In China, platinum jewellery has also faced strong competition from karat gold due to the latter’s shorter process time and affordability, diverging prices of the underlying metals (supporting gold’s quasi-investment interest), fashion trends including the patriotic consumer trend of “China-Chic” (“Guochao”) and platinum jewellery’s higher buy/sell spreads.

Platinum jewellery demand outside of China

Excluding China, platinum jewellery demand has increased by a 3.9% CAGR from 2014 to 2023 with growth in markets outside of China now typically offsetting lost China demand on a year-on-year basis. This growth reflects a combination of strong growth from the luxury market and successful promotion in India. Regionally, demand in the US has benefited from strong economic growth, while the EU’s luxury goods houses are incorporating more platinum into their products (e.g. watches) and, in India, market development initiatives and fabrication for export have spawned a rapidly expanding market.

Notably, diverging demand trends between China and the rest of the world have led to a rebalancing of geographical diversification within platinum jewellery compared to the previous situation of being overly reliant on China (figure 3).

Figure 3. Since 2014, platinum jewellery demand has become more geographically diversified

Source: SFA (Oxford) 2014, Metals Focus 2023, World Gold Council, Silver Institute

Diversifying demand away from China has led to an inflection in platinum jewellery markets. Total demand has been broadly stable from 2021 to 2023 and is estimated to have increased 5% year-on- year in 2024, with 2% year-on-year growth forecast this year, due to steady ex-China demand growth. The geographic balance in platinum jewellery demand stands in contrast to the gold and silver jewellery markets, which are heavily dominated by ‘Rest of the World’ demand, which is predominantly India.

The impact of price on platinum jewellery demand

Platinum jewellery demand (ex-China) shows a pronounced negative relation to price (figure 4). The negative correlation between demand and prices demonstrates that the jewellery trade is price conscious, with demand decreasing as prices rise, until such time that higher prices are seen as normal and value expectations reset.

Figure 4. Platinum jewellery fabrication (ex-China) is negatively correlated to price

Source: Johnson Matthey 2001-2012, SFA (Oxford) 2013-2018, Metals Focus 2019-2023, Bloomberg, WPIC research

However, it is not accurate to assume that fluctuating platinum prices translated directly to retail jewellery prices. Given the structure of the jewellery trade, varying underlying metal prices should be interpreted as impacting input costs which support larger or smaller margins for the fabricators and retailers depending upon if the platinum price declines or increases, respectively.  Hence, when lower underlying platinum prices over the past decade are taken into consideration, the ex-China jewellery trade has been incentivised to increase platinum jewellery fabrication due to higher margin opportunities. In contrast, the spot gold price has risen 32% year-to-date compared to a -2% decline in the platinum price. On this basis, the jewellery trade may switch some of its inventory from gold to platinum due to better relative value and the ability to release working capital (figure 5).

Figure 5. Higher gold prices have led the price of gold jewellery to the price of a like-for-like platinum equivalent which could support switching to platinum

Source: Bloomberg, Various UK retailer prices, WPIC research, *Like-for-like ring designs used with prices Inclusive of implied fabrication and retail margins

Prospect of market-share gain from white gold

The rise in gold prices over the past two years has led to a narrowing and convergence of the retail price of white gold and platinum jewellery. The WPIC estimates that the jewellery trade, which may ordinarily have carried more affordable white gold, could switch to platinum alternatives given margin advantages.

There are added benefits in switching from white gold to platinum which could provide further motivation. Platinum’s physical properties make it a superior metal for gem-set jewellery due to its strength – an especially important consideration in the bridal market. While its appearance is similar to that of white gold, platinum is a purer jewellery metal that is less likely to tarnish, unlike white gold jewellery that may need re-plating, depending on wear and tear.

Assuming 5% of white gold demand is switched into platinum demand, this would increase total platinum demand by an average of 100 koz or 1.3% p.a. through the years 2025-2028.

While it may be too early to tell whether or by how much platinum jewellery demand could benefit from switching, any demand uplift would act to deepen WPIC’s forecasts for already substantial platinum market deficits out to 2028. Our base case forecasts are for platinum market deficits to average 712 koz per annum, or 9% of annual demand, between 2026 and 2028.

 

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