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Platinum faces more pain from sluggish Chinese jewellery demand-2015Guangzhou int¡¯l non-ferrous metals exhibition
3/17/2015 non-ferrous metals expo |
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More pain is in store for platinum bulls this year, as a fall in prices of the white metal to 5-1/2-year lows is failing to generate significant new jewellery demand in the once reliably price-sensitive Chinese market, analysts say.
Last time platinum prices were at current levels, in 2009, Chinese platinum jewellery buying more than doubled year on year to record levels above 2 million ounces, Johnson Matthey data shows.
However, platinum jewellery demand was fairly lackluster throughout the second half of last year despite a near 20 percent price slide, and initial reports suggest it has remained so into early 2015.
Goldman Sachs cited slowing Chinese platinum demand as a factor in its recent long palladium, short platinum trade recommendation, while the World Platinum Investment Council said last week that it expects Chinese jewellery platinum jewellery demand to be flat this year. The lack of a stronger bounce bodes ill for prices. "
We used to talk about platinum jewellery demand being the shock absorber of the market, because it was strong when everything else was weak," Macquarie analyst Matthew Turner said. "It should therefore be strong at the moment, but it hasn''''t been. If it has lost its price sensitivity, that bodes quite badly for the platinum price."
Chinese jewellery demand typically accounts for some 20 percent of all global platinum consumption, making it a key market segment. China''''s economy grew at its slowest pace in 24 years in 2014, which analysts say could have hurt jewellery purchasing. Mitsui Precious Metals analyst David Jollie said a crackdown on corruption last year, which has also affected gold buying, may have crimped demand.
While prices are lower, he added, they are not following the trajectory they did in 2009. "The platinum price had risen solidly from 2001 to 2008 and there were expectations of further price strength, so the incredibly sharp decline was a buying opportunity. It is less obvious that today''''s price should ''''feel'''' like a bargain."
While all the precious metals have been weak this year, platinum is the biggest faller, sliding 7 percent since end December. It hit its lowest point since July 2009 on Monday at $1,106.50 an ounce. The dearth of Chinese jewellery demand suggest some buyers are betting on further price weakness, Jollie said. "Rather sensibly, (manufacturers) want to buy at the bottom of the market. They don''''t just automatically buy into price weakness if they feel there is more coming." Given their position in the platinum market, that may prove a self-fulfilling prophecy.
-2015Guangzhou
int¡¯l non-ferrous metals exhibition
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