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LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 1
Platinum Jewellery in China and India
keys to future platinum demand
LBMA Hong Kong
5th November 2012
Content
• Platinum jewellery’s performance
• Jewellery demand is important
• China – the major player
o Manufacturers
o Retailers
• India – an opportunity
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 2
Platinum market continues to show long
term growth in value terms
0
200
400
600
800
1000
1200
1400
1600
1800
2000
-
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
3,500,000,000
4,000,000,000
4,500,000,000
Total Value of Gross Ounces US$ Average
US Dollars (Bn)
Source: Johnson Matthey Price Source: Kitco.com
Platinum Jewellery value has grown well
above Global GDP Index 2001=100
0
1000
2000
3000
4000
5000
6000
50
100
150
200
250
300
350
400
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Platinum Value NominalGDP US$ value gain
US$ gain over
nominal GDP
trend
Sources: IMF (April),
Johnson Matthey
4
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 3
Figures: Johnson Matthey 2012 Review
Demand for platinum for jewellery manufacturing
not greatly affected by metal price
0
500
1000
1500
2000
2500
0
500
1,000
1,500
2,000
2,500
3,000
2005 2006 2007 2008 2009 2010 2011
China Japan US Jewellery Europe
Other US$ Average US$ Low US$ High
Jewellery as a percentage of Platinum demand – trending
up
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2006 2007 2008 2009 2010 2011
Jewellery Gross Total Gross Demand Ratio J:I
‘000 oz
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 4
China - a volume demand source for
platinum
7
PGI’s Marketing programme in China
jewellery development worth US$4.3
billion in net demand
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 5
Meaning vs Cleaning
• Meaning is on the up when you compare
Europe to China
Demand for Autocatalyst (Europe) and
Jewellery (China) 2007-2011
0
500
1000
1500
2000
2500
2007 2008 2009 2010 2011
Autocat. Europe
Jewellery China
2009 does not
included
300,000 oz of
stock build –
according to
JM’s 2010 review
Source: Johnson Matthey Review 2012
‘000 oz
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 6
China – a major industry
• The role of China - a volume demand source for
platinum
• The potential of China jewellery
11
These Chinese jewellery manufacturers
produce more platinum jewellery than the
USA + UK + Germany
• Baijue
• Bo-fook
• EDL
• Fuqi
• Junli
• Ganlu
• Guanhua
• KingLi
• Lingchen
• S & M
Some manufacturers produces more than the total US jewellery production
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 7
2.0%
2.1%
3.0%
3.1%
3.6%
3.8%
6.4%
6.9%
7.1%
9.0%
12.6%
Chow Sang Sang
Kimberlite Diamond
Luk Fook
Cartier
Zhe Jiang Ming
First Asia
Beijing Caishikou
Lao Miao
Chow Tai Seng
Lao Feng Xiang
Chow Tai Fook
Jewellery market share by retail value
in China (2010) Chow Tai Fook has over 1,600 points of sale & aims to open a net average of 200 jewellery POS per year from 2012 to 2015
PGI works directly with retailers representing 31% of
the jewellery market and covering 320 cities in China
1st tier PGI Partners: 6
6771outlets
Approx 28% of market
Key Influencers HK Or National Brands
Key Growth Driver Strong Market Performance
High Growth Rate Significant market investment
6670outlets Approx 31% of market Key Influencers HK Or National Brands Key Growth Driver Strong Market Performance High Growth Rate
Significant market investment
........................................................................................
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 8
0
200
400
600
800
1000
1200
1400
1600
1800
2006 2007 2008 2009 2010 2011 E 2012 E 2013 E 2014 E 2015 E
Tier 1 cities Tier II cities Tier III cities and lower tier cities
Outlook for jewellery benefitting from
increasing growth in lower tier cities (in HK$ billion)
Total: 2010 – 2015E CAGR: 39%
Tier I cities: 2010-2015E CAGR: 32%
Tier II cities: 2010 – 2015E CAGR: 37%
Tier III cities & other lower tier cities: 2010 – 2015E CAGR:
45%
Source: Frost & Sullivan Report
0
200
400
600
800
1000
1200
1400
1600
1800
2006 2007 2008 2009 2010 2011 E 2012 E 2013 E 2014 E 2015 E
Gold products Platinum/Karat gold products Gem-set jewellery
Positive outlook for the jewellery market
in China with breakdown by product
(HK$ billion)
Total: 2010 – 2015E CAGR: 39%
Gold products: 2010-2015E CAGR: 40%
Platinum/karat gold products: 2010 – 2015E CAGR: 40%
Gem-set jewellery: 2010 – 2015E CAGR: 35%
Source: Frost & Sullivan Report
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 9
5006 5486 5809
Y2009 Y2010 Y2011
No. of Outlets Within monitored 32 cities
10%
3900 4938
6731
Y2009 Y2010 Y2011
No. of Outlets among 5 SPs (CTF/LF/LFX/S&M/CTS)
nationwide
27%
6%
36%
New Jewelry Store Opening
(2009 – 2011)
• The average annual increase in new jewellery store opening in mainland China is 15%
• In the 32 cities PGI monitors, the rate has ranged from 6 -10%
• PGI’s strategic partners, focused more on lower tier cities, have increased by 27 – 36%
Others, 1.7% Specialised markets, 9.8%
Stores in shopping mall, 13.7%
Stand-alone branded stores,
30.1%
Department stores, 44.7%
China’s jewellery sales breakdown by
retail channels (2010)
Source: Frost & Sullivan Report
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 10
Bridal opportunity for platinum
2011 urban wedding population
Total wedding
population
12.65 Mn
Unit: Pair
Urbanization
47.5%
Urban wedding
population
5.7Mn
Urban wedding population with
HHI to purchase bridal rings
4.17Mn
Source: Millward Brown
Note:
1.Registration data from Ministry of Civil Affairs of China
2.There is no split for age breakdown or 1st/repeat marriage from the raw data.
National volume of bridal ring potential
530,000 oz (6.5% of total global demand)
2014 volume estimate of Pt bridal
potential
• Key assumptions
o Annual growth of wedding population: 5% (accumulated 16%)
o Urbanization reached 50%
o Annual growth of avg. No. of rings 5% (accumulated 16%)
o Annual growth of Pt acquisition: 5% (accumulated 16%)
Urban wedding population with affordability (excl 6)
5.26 Mn
Volume Estimate of bridal ring potential in 2014
875,000 oz
+ 64.7% accumulated growth in 3 years
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 11
New Asia is developing a new dynamic
for platinum jewellery
• The role of China - a volume demand source for
platinum
• The potential of China jewellery
• India – platinum meets the opportunities of an
evolving consumer and a new type of jewellery retailer
India – an opportunity – at trade and
consumer levels
• Now the 4th largest market for platinum
jewellery
• Platinum finding a market in traditional areas
o Platinum Day of Love
o Gift to daughter
o Men’s market
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 12
Developing an insight
• Marriages’ arranged
• Wedding – family occasion
• Couple find their……
Platinum Day of Love
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 13
Increasing support from the jewellery industry
India – the opportunities come together
• Younger consumers are looking for a wider
choice
• Retailers are looking to increase their sales
and margins
• Platinum is an answer
• New stores
o Tanishq & Reliance
o In-store in department stores
o Regional and independent jewellers focusing on the
emerging Indian consumer
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 – Courage 14
Meaning vs Cleaning
• China platinum jewellery demand is running ahead of
Euro car catalysts
• China is well placed to grow through bridal acquisition
and jewellery expansion - especially in the Tier ll and
Tier lll cities
• India is finding platinum traction with the young and as
the symbol of love after they get married
• There is an opportunity for men’s platinum jewellery
• Platinum is driven by consumer desire and the business
benefit for the retailer.