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LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 1
Platinum Jewellery in China and India
a key to future platinum demand
LBMA Hong Kong
12th November 2012
Content
• Who is PGI
• 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
Who is PGI
• “PGI develops demand for, and builds an
enduring commitment to, platinum in
jewellery”.
Who is PGI
Who We Are
• PGI is a global organisation operating since
1975, that provides knowledge and insight on
platinum to the benefit of the jewellery
industry.
• PGI has offices in 7 major jewellery markets –
each with experienced personnel covering
industry relations and marketing
communications.
• PGI is primarily sponsored by South Africa’s
leading platinum producers.
• •
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 3
Who is PGI
What We Do
• PGI inspires confidence in the development of platinum
jewellery.
• PGI develops a close understanding of its consumer
target groups and delivers the benefits to its trade
partners.
• PGI leads the industry in retail training.
• PGI works collaboratively with leading retailers
• PGI works to be at the forefront of effective consumer
communication.
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
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 4
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
7
Global 2011 Platinum Jewellery Market
– Gross (‘ooo oz)
Total: 2,480,000 oz
31% of total gross demand
Source: Johnson Matthey
68% 2%
3%
7%
7%
13%
Europe (175)
India (80)
USA (185)
Japan (315)
China (1,680)
Rest of World
(45)
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 5
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
Platinum Demand (‘000 ounces)
2006 2007 2008 2009 2010 2011
Jewellery* 2195 2110 2060 2810 2420 2480
Autocatalyst* 3905 4145 3655 2185 3075 3105
Industrial 1625 1845 1720 1140 1755 2050
Investment -40 170 555 660 655 460
Total 7685 8270 7990 6795 7905 8095
* gross
Platinum Demand % Share
2006 2007 2008 2009 2010 2011
Jewellery* 29% 26% 26% 41% 31% 31%
Autocatalyst* 51% 50% 46% 32% 39% 38%
Industrial 21% 22% 22% 17% 22% 25%
Investment -1% 2% 7% 10% 8% 6%
Platinum Jewellery has increased its share of platinum demand, as well as increasing the number of ounces
Source: Johnson Matthey
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 6
China - a volume demand source for
platinum
11
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 7
Meaning and 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 8
Jewellery Motor cars
• Women love
jewellery
• Jewellery part of
her life
• In Asia the
woman ‘drives’
the purchase
• Men are buying
more
• Men ‘love’ cars
• Cars part of
how he wants
to be perceived
• Largely the
man who pays
• Women are
buying more
China – a major industry
• The potential of China jewellery
16
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 9
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
China - volume manufacturers
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 10
Manufacturer Showrooms
Sell more platinum than the largest retailers
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 11
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 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 12
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 13
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 Jewellery Store Openings
(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%
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)
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 14
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
China - both Pair and solitaire rings in
platinum
GMOND Pt pair rings
Zbird Bridal page
Luk Fook – plain pair rings
Chow Tai Fook Bridal
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 15
New Asia is developing a new dynamic
for platinum jewellery
• 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 16
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 17
Platinum Day of Love
Increasing support from the jewellery industry
LBMA/LPPM Precious Metals Conference 2012 12 November 2012
Session 4 - Courage 18
New Gitanjali print and TVC
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 19
Meaning and 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.