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PGI: Performance of platinum jewellery in four major markets during Q3

03 january 2022

The ‘Platinum Jewellery Business Review’ released a research study of platinum jewellery’s performance in four major markets - the USA, China, India & Japan - during Q3 2021.

According to the statement, China’s GDP slowed in Q3 with the lowest rate in 2021. Japan’s economy faced challenges primarily driven by a power crunch and supply chain state of emergency in Q3. Platinum sales grew but at a slower pace than other categories.

USA: The US economy in Q3 faced headwinds, experiencing a V-shaped recovery after the pandemic. Platinum jewellery sales from PGI strategic and PGI business partners experienced double-digit growth driven by early sales growth after a robust first half. The USA selected three recipients with distinct business models for the Business Development Grant to continue to expand the platinum jewellery market.

The US pandemic recovery experienced some bumps in the road during Q3 with economic growth slowing, partially as a result of supply chain bottlenecks and a spread of the Delta variant of the coronavirus. Q3 GDP growth is reduced to 2.1% on an annualised basis from the previous quarter, and down from 6.7% in Q2 growth.

The decline in growth was mainly attributed to consumer spending that previously drove the recovery and slowed business investment. On a year-on-year basis, GDP still grew 4.9%, compared with 12.2% in Q2.

With the remarkable growth in sales by the end of Q3, the “Platinum Woman” collection welcomed a new brand ambassador and an additional retailer carrying new products to be released in Q4.

Strategic partners’ platinum business delivered remarkable growth in Q3 and started to stock up for a strong holiday season, with new collection launches, aggressive marketing plans, promotions and special offers as they are looking to drive higher margins to compensate for the loss of business in Q2 2021.

CHINA: Platinum jewellery sales declined against a strong recovery last year and intense gold competition. China’s economy showed signs of stalling with Q3 GDP growing 4.9% YoY, the lowest rate so far this year, following growth of 18.3% YoY in Q1 and 7.9% YoY in Q2. This led to 9.8% YoY of GDP growth in the first nine months of 2021.

China’s platinum fabrication declined by 37% YoY in Q3, while sales at PGI retail partners saw a slower decline at 22% YoY in Q3. Despite overall weak performance, platinum branded collections brought novelty to consumers and outperformed generic products. Targeted marketing activities showed the power of good design and promotion in delivering positive results.

The total platinum transactions via Shanghai Gold Exchange increased by 87% YoY to 18.0 tonnes in Q3 2021 leading to a 39% YoY increase to 46.9 tonnes in the first three quarters. This growth is partly attributed to the implementation of expansion plans by glass fibre manufacturers and the increase in inventories, but overall, the main force driving trade flows is speculative buying.

As per the study, China’s customs data showed that net platinum imports also increased by 67% YoY to 31.9 tonnes in Q3 2021, leading to a 32% increase to 85.1 tonnes in the first three quarters. Hong Kong’s net import volume of platinum, an indication of unofficial imports for jewellery use, declined by 21% YoY to 4.8 tonnes in Q3 2021, but still achieved a 239% increase to 10.1 tonnes in the first three quarters.

Platinum fabrication declined 37% YoY in Q3, against the V-shaped recovery in Q3 2020 (+13% YoY), ahead of other categories such as gold (-25% YoY in Q3 2020). This led to a decline of 16% YoY of fabrication in the first three quarters of 2021.

China’s jewellery market had slower sales growth in Q3 2021, due to sporadic outbreaks of the COVID-19 pandemic and a continued softening of the economy. PGI retail partners’ platinum sales volume declined by 22% YoY in Q3 2021, leading to a decline of 2% YoY in the first three quarters of 2021. Non-partners performed significantly worse. Platinum branded collections brought novelty to consumers and outperformed generic products.

Despite overall weak performance, promotional activities on branded collections showed the power of good design and promotion in delivering positive results across multiple partners in Q3.

Plain platinum dropped by 40% YoY in Q3 as the popularity of gold squeezed the space for platinum. Compared with August, plain platinum business improved by 33% in September, despite being still below the level in September 2020, when platinum rebounded quickly. Higher preference for value-preserving products boosted gold jewellery demand on top of the relatively low gold price, and the shift to weight pricing for premium gold products further fueled demand, resulting in a lower share of wallet for other categories including platinum and gem-set.

 The gem-set market was also affected, seeing platinum gem-set fabrication declining by 13% YoY. Large diamonds were favoured due to their value preservation. Most gem-set manufacturers are reluctant to stock finished products, and platinum gem-set production suffered due to a longer production time.

PGI’s strategic partners saw a growth of 55- 60% YoY in platinum jewellery sales volume in Q3 2021, compared to Q3 2020, driven by multiple factors. The growth is over a low base in Q3 2020, when most markets were largely closed and with limited business, as the recovery had not yet started last year. While the market has opened in June to save the full Q3, some wedding purchases were made in Q3 on the back of a potential third wave in Q4.

PGI’s strategy to kick-start the market recovery early in Q3 with marketing programmes for Platinum Days of Love and Platinum Evara built the momentum by driving consumers to stores. Strategic partners saw a faster platinum sales recovery on the back of PGI’s conversion programmes.

PGI’s promotions from selective retailers during Chinese Valentine’s Day, Mid-Autumn Festival and Reboot roadshows delivered double-digit to triple-digit growth in platinum jewellery piece sales. Strategic partners continued to launch platinum collections and products targeting young consumers.

Manufacturers promoted heavier products with men’s and unisex designs to balance the loss of volume from lighter pieces.

PGI released a wide range of new designs under the three platinum brands 55-60% and leading manufactures showcased over 2,000 new products at the largest.

INDIA: India’s economy is experiencing a V-shaped recovery due to pandemic, supply chain constraints and labour a lockdown period in H1 but retail sales remained strong. Business rebounded, especially gold, buoyed by lower gold prices. Platinum jewellery sales from PGI strategic and PGI business partners experienced double-digit partners delivered notable growth, driven by early sales growth after a robust first half.

Consumer confidence in India, measured by the Reserve Bank, rose in Q3. The current situation index in September improved to 57.7, reflecting better sentiment towards the general economic situation, employment, household income and expenditure. The future expectations index also showed a similarly positive trend, aided by higher optimism on the prospects over a one-year horizon.

According to the study, India has significantly ramped up its vaccination programme and administered more than 896 million vaccine doses as of 1 October 2021. 70% of India’s adult population has received the first dose, while 25% are fully vaccinated as of 4 October 2021.

As most restrictions have been eased across states during the holiday and wedding season in Q4, the government and the Indian Council of Medical Research (ICMR) have cautioned people to stay vigilant due to the threat of a possible third wave. Post the disruption in Q2 caused by the intense second wave of COVID-19, India’s economy began a steady recovery in Q3, supported by a reduction in the number of new infections leading to markets opening up across the country.

India’s GDP in Q3 grew by 8.4% YoY, compared to a contraction of 7.4% YoY a year ago. It is slower than the 20.1% YoY growth in Q2. Investment remained the key growth driver, yet private consumption spending still lagged. This has led to 13.7% YoY growth for the first half of FY2021-22, and the Finance Ministry’s Chief Economic Advisor forecast double-digit growth for the full financial year (April 2021 – March 2022).

The World Bank has projected India’s GDP to grow at 8.3% in the current financial year in its latest forecast, while the Reserve Bank of India has projected a GDP growth of 9.5%. India’s unemployment rate also saw a gradual recovery in September to 6.9% as compared to May 2021, where it was 11.9%, according to the Centre for Monitoring Indian Economy Survey. A momentum in supply chain and manufacturing activities led to the purchase managers index (PMI) for manufacturing improving to 53.8 in Q3 2021, from 51.5 in Q2 2021, and any figure above 50 indicates expansion. The gross goods & services tax (GST) collection hit a five-month high in September 2021. The GST collections remained above $13.62 bn for all three months of Q3 2021, according to government data.

Post the second wave of COVID-19, Indians’ appetite to spend on precious jewellery has seen a rise and platinum brands enjoyed a boost.

JAPAN: Platinum jewellery sales improved marginally. Japan’s consumer confidence index dipped in August to 36.7 as COVID- 19 cases continued to rise. New cases peaked in late August as the Delta variant took hold but are down as of the end of October.

Retail sales in Japan stalled in Q3, falling for a second consecutive month in September (- 0.5% YoY) followed by a fall of 3.2% YoY as consumers limited spending amid concerns over the longer than expected grip of the pandemic. Q3 was the worst quarter in 2021 as it was impacted by surging cases, following a strong rebound in Q2. 202 out of 273 days in 2021 were under a “State of Emergency,” including all of Q3, which was finally lifted from 1 October 2021.

Platinum sales are driven by asset-type products and new products offerings, which are expected to grow following the end of the state of emergency. The “Platinum Woman” collection targeting young consumers welcomed a new brand ambassador and an additional retailer carrying new products. Outlook for platinum jewellery demand in Q4 is optimistic, especially with new product offerings just before the Christmas shopping season.

Sales in Q3 grew 2.4% in value, 1.1% in units and 1.3% in average price, compared with the same period last year, but not yet back to pre- COVID levels. Despite ongoing restrictive measures, Q3 saw consumer traffic climbing and retailers acclimating to a “living with COVID” business environment. With restricted spending on travel and dining out, the wealthy continued to support sales by maintaining their appetite for high-end jewellery.

The market saw the average unit price of bridal jewellery increase but unit sales remained at the same level. Platinum could potentially benefit from this trend.

Japan’s real GDP contracted 0.8% in Q3 from the previous quarter, or an annualised rate of 3%, lower than expectations amidst the worst spread of COVID-19 since last year. On a year-on-year basis, GDP grew 1.4%, against the low base last year.

Among PGI partners, platinum continues its impressive, double-digit growth and all of them expect strong year-end results not only compared to 2020 but 2019 as well. It has been a “banner year” for many in the industry and sentiment has been extremely positive.

Platinum jewellery unit sales from PGI USA’s primary business development partners grew for the fifth consecutive quarter by nearly 20%. Platinum ounces grew over 30% as retailers started building stock for the upcoming holiday season. Sales in platinum crowns increased over 20% YoY in Q3, showing a stronger appeal of platinum for diamond and gemstone jewellery.

PGI USA’s gemstone jewellery brand partner reported that the first nine months of 2021 nearly matched the full year 2020 sales. They have continued to expand their distribution to the major chains, department stores and independent retailers.

PGI has a very positive outlook for the platinum jewellery business in Q4 and throughout 2022. Sentiment among independent retailers and jewellery manufacturers has been positive. Their balance sheets are strong since they have reduced aged inventories during the pandemic shutdown and are more engaged with consumers through an upgraded omnichannel strategy. The most common challenge now is in retaining and attracting workers, especially experienced bench jewellers.

The average expected spending on non-bridal jewellery self-purchase increased in all four markets, with double-digit growth in Japan, China and India, with the US up 6%. Spending for others also increased, most notably in Japan and China, while India and the US increased slightly. Self-expenditure on bridal jewellery, meanwhile, is estimated to be higher than Q3 2020 for most markets, with China leading at 21% growth, followed by India (+10%) and the US (+4%).

Millennials and Gen-Z consumers are the driving force of future purchases. Younger consumers, such as Millennials and Gen-Z, will be the driving force in the precious jewellery market, not only because they are the core consumers for bridal jewellery, according to the survey.

Platinum has gained more attention amongst young consumers in multiple markets. Preference for platinum has increased in China and the US, while the Japanese continued to show the highest preference for platinum. The improved preference for platinum is mainly seen for engagement rings and wedding bands.

Preference for platinum engagement rings and wedding bands dominated among Japanese women aged 18-30 in Q3 2021, up from below 70% in the previous three quarters to 90% and 75% respectively. Chinese women in the same age group also expressed an uptick in their preference for platinum wedding bands and engagement rings compared with the last three quarters.

The cross-market survey interviewed 2,000 jewellery buyers and wearers aged from 18 to 65 from PGI’s four key markets – China, India, Japan and the US – who have bought or expect to buy precious jewellery. Results show consumer sentiment for non-bridal jewellery remains high in China, India and the US, and India has shown a good recovery in Q3. Apart from Japan, there is overall positive sentiment for precious jewellery.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished