Objective Capital's Precious Metals, Diamonds & Gemstones
Investment Summit 2011
Ironmongers' Hall, City of London
6 April 2011
Speaker: Rupen Raithatha, Johnson Matthey
1. PRECIOUS METALS,
DIAMONDS & GEMSTONES
INVESTMENT SUMMIT
The platinum jewellery market in China
Rupen Raithatha – Investment & Economic Analyst, Johnson Matthey
IRONMONGERS’ HALL, CITY OF LONDON ● WEDNESDAY, 6 APR 2011
www.ObjectiveCapitalConferences.com
2. A Look at the Pt Jewellery
Market in China
Rupen Raithatha, 6th April 2011
Market Research
3. Market Research
Agenda slide
1 Overview of the Pt Market
2 Snapshot of the Global Pt Jewellery Market
3 The Importance of Jewellery Demand
4 The Chinese Market
5 Market Potential
4. Market Research
Platinum Demand & Supply
7000 7000
• Market has grown
6000 6000
over time
5000 5000
Demand/Supply (000 oz)
Demand/Supply (000 oz)
4000 4000 • ….but always a
fairly tight market
3000 3000
2000 2000 • Jewellery and
1000 1000
Investment
expected to be
0 0 more price elastic
1975 1980 1985 1990 1995 2000 2005 2010
Autocat Net Chemical Electrical Glass Petroleum
Other Investment Jewellery Supply
5. Market Research
The Rise of China
2,200
2,000
• Japan for so long the
1,800 largest jewellery
Jewellery Demand (000 oz)
1,600 market
1,400
1,200
1,000 • Eclipsed by China
800 since the early 2000’s
600
400
200
0
1975 1980 1985 1990 1995 2000 2005 2010
Japan China Europe + N America
6. Market Research
Autocatalyst & Jewellery as % of
Total Demand
60%
• Jewellery tends to
50% offset softer autocat
% of Total Demand
demand
40%
30% • Plays a crucial role
in the market
20%
10%
0%
1975 1980 1985 1990 1995 2000 2005 2010
Autocat Jewellery
7. Market Research
Jewellery as % of Total Demand Vs Price
60% 1800
• As expected,
50% 1500 jewellery is
% of Total Demand
responsive to price
40% 1200
Price ($/oz)
30% 900
20% 600
10% 300
0% 0
1975 1980 1985 1990 1995 2000 2005 2010
Autocat (lhs) Jewellery (lhs) Price (rhs)
8. Market Research
China Jewellery Demand 1995-2010
12,000
• Counter-intuitive
10,000 demand function
Price (RMB/oz)
• Income effect
8,000
• Lack of market
6,000 maturity
• Consumer surplus
4,000
2,000 • However, since
0 200 400 600 800 1000 1200 1400 1600 1800 2000 2002…..
Demand (000 oz)
9. Market Research
China Jewellery Demand 2002-2010
12,000
2008
11,000
2010
• Signs of a mature
10,000 2007 market or is the
Price (RMB/oz)
9,000 2006 price effect
8,000 2009 outweighing the
7,000
2005
2004
income effect
6,000 since 2002?
2003
5,000
2002
4,000
1,000 1,200 1,400 1,600 1,800 2,000
Demand (000 oz)
10. Market Research
Weekly Pt Purchasing on the
Shanghai Gold Exchange (2010-March 2011)
1500 2,150
• SGE users are good
1250 2,050
at buying into price
1000 1,950
dips
SGE Price ($/oz)
Volume (kg)
750 1,850
500 1,750
250 1,650
0 1,550
10
11
20
20
Volume Price
11. Market Research
Current and Historic Pt Market Penetration
2 16 • Japan mid-90’s peak
several times greater
1.75 14
Consumption oz/000 capita (Japan)
than any other market
1.5 12
Consumption oz/000 capita
(Europe/N America/China)
1.25 10 • ….but China has
1 8 potential to grow….
0.75 6
0.5 4
0.25 2
0 0
1975 1980 1985 1990 1995 2000 2005 2010
Europe (lhs) N America (lhs) China (lhs) Japan (rhs)
12. Market Research
Some Caveats
• Japan unique circumstances – the ‘perfect storm’
• Restrictions on buying/selling Au until mid-70s
• Pt price close to Au price
• Relatively low Pt price in absolute terms
• ‘Bubble’ economy
• Strength of the ¥
• Relatively high Pt content per piece
• Successful marketing
• Unlikely that per capita consumption in China will come close to Japan’s peak
• Has Pt price volatility damaged perception of Pt as a store of
wealth?
• Strong competition from non-jewellery luxury sector
13. Pt:Au Ratio
Jan
-
0
0.5
1
1.5
2
2.5
Jan 75
-
Jan 77
-
Jan 79
-
Jan 81
-
Jan 83
-
Jan 85
-
Jan 87
-
Jan 89
-
Jan 91
-
Jan 93
Pt:Au Price Ratio
-
Pt:Au Ratio
Jan 95
-
Jan 97
-
Parity
Jan 99
-
Jan 01
-
Jan 03
-
Jan 05
-
Jan 07
-
Jan 09
-11
•
equal.
Market Research
Japan’s peak came
when Pt and Au about
14. Market Research
Nevertheless, potential for further
growth remains strong….
• China in 2011 is on an earlier point on the growth path than
Japan in mid-90s
• Efforts to increase domestic consumption as a proportion of
GDP
• High savings ratio
• Rate of urbanisation
• Marketing to 2nd and 3rd tier cities
• Stronger RMB over time will soften any rise in the US$ price
• Size of population
• Chinese demand has come when Pt price > Au – seen as the
primary metal by many
15. A Look at the Pt Jewellery
Market in China
Rupen Raithatha, 6th April 2011
Rupen.Raithatha@matthey.com
+44 (0)1763 25 63 22
Market Research
