Johannesburg - The worldwide demand for platinum jewellery was expected to fall further this year because of the metal's high price following a rally in Chinese consumption, analysts said yesterday.
Johnson Matthey said yesterday that the worldwide demand for platinum jewellery fell to 1.96 million ounces last year, the lowest level of annual consumption since 1996, when 1.99 million ounces of platinum jewellery was sold.
In 1999 demand peaked to a record 2.88 million ounces.
Matthew Turner, an analyst at London-based Virtual Metals, agreed that global demand for platinum jewellery was likely to continue to decline this year, but at a slower rate than over the past five years.
South Africa produces about three-quarters of the world's platinum from mines in the Bushveld complex mainly situated in the northern provinces of Limpopo, North West and Mpumalanga.
In May, the spot price of platinum climbed to a record high of $1 337.50 an ounce. Yesterday afternoon in London platinum was fixed at $1 254 (R9 300) an ounce, down $14.
UK-based analyst James Moore of TheBullionDesk.com said the trend of declining platinum jewellery demand was likely to continue given the consumer price sensitivity, especially in China.
But the metal would benefit from demand for use as jewellery in the high fashion market, Moore said.
London-based GFMS chief executive Paul Walker said that platinum jewellery demand in 2006 had declined, but there was evidence that the market was consolidating after the tremendous declines over the past five years, especially in China and Japan.
The bridal jewellery market for platinum was less price sensitive than the market for the use of jewellery as adornment, Walker said.
On the other hand, Turner said, jewellery demand for palladium, platinum's sister metal, was likely to have continued to increase, especially in China.
Worldwide palladium jewellery consumption has grown from 215 000 ounces in 1996 to a high of 1.43 million ounces in 2005, largely driven by increasing demand from China as the metal's price declined.
Chinese palladium jewellery consumption has surged from 55 000 ounces in 2003 to 1.23 million ounces in 2005.
The spot price of palladium yesterday lost $2.50 to fix at $346.50 an ounce in London.
US platinum group metals miner Stillwater has forecast that the palladium jewellery market would grow to 1.6 million ounces this year.
However, Walker said that he would be surprised if the sharp growth in demand for palladium jewellery would be sustained in 2006.
An interesting development was that palladium jewellery appeared to be establishing a foothold in the US, he said.
More than half of all the platinum and palladium produced is used as a catalyst in devices to reduce exhaust emissions from motor engines.