Consumers check out the gold and platinum accessories at a jewelry store in China. (Photo : Reuters)
Despite lower global prices, the demand for platinum jewelry in China is diminishing, which sends global demand to further decline, Reuters reported.
China makes up for more than 60 percent of the global manufacture use of the metal, making it the biggest market for platinum jewelry, the report said.
In time for the London Platinum Week that started on Monday, May 16, GFMS analysts said that the demand for platinum jewelry is expected to fall to double-digit this year. Last year, the 7-percent drop in Chinese demand has resulted in a 4-percent drop in global demand.
As China's growth slowed down, consumer behavior in China changed significantly, especially spending on luxury goods.
"It's not as if consumers aren't spending money, but they're not spending it on jewelry in the way they used to," Philip Klapwijk, director of Hong Kong-based Precious Metals Insights, said. "Consumers' discretionary purchasing power is being spent on other things--white goods, and certainly tourism. More Chinese tourists are going abroad, and that also means during important public holidays, fewer people are visiting department stores."
The biggest overall buyers of platinum are the carmakers who use platinum in catalytic converters. They account for at least 40 percent of global demand. But on regional basis, Chinese jewelers, who bought 1.561 million ounces of platinum last year, are the biggest single consumer of the metal.
The crackdown on corruption initiated by the Chinese government in 2012 has also affected the luxury sector and discouraged officials from buying expensive jewelry.
As jewelry sales decline, gold, especially white gold, has become an alternative and a strong competitor over platinum. During the sharp decline in gold price in 2013, gold sales have reached record highs.
The report, however, said that the drop in platinum prices to below $1,000 an ounce last year had no corresponding effect on the price of gold on global markets since the start of 2015. It is not also reflected in China's consumer level.
"Unlike those gold products that are sold by weight, our platinum jewelry is sold at fixed price," a spokesman for Chow Tai Fook, China's largest jewelry retailer by market value, said. "Thus we do not see any significant impact on the demand for platinum jewelry in relation to the ups and downs of the platinum price."
The report added that price of platinum jewelry cannot be adjusted because it has higher cost and gold is often bought by consumers as investment.
"Consumers are far more educated today," GFMS analyst Cameron Alexander said.
"They fully understand the markup structure and where the metals are trading on a spot basis, so when they could see no--or only moderate--movements in the retail price when platinum was trading at such low levels it was seen as overpriced," the analyst added.
