Consumers Prefer Platinum

RAPAPORT… Despite a general consensus that Japan’s decade-long recession is now behind it and that certain segments of the economy — such as information technology — are thriving and leading the country into its longest economic expansion, it appears the jewelry trade is not benefiting from the recovery. Some blame the recent price hikes in precious metals, particularly platinum, for the jewelry industry’s lagging behind the rest of the economy, making jewelers reluctant to carry costly inventories.

Akihiro Arai of Platinum Guild International (PGI) Japan disagreed. He referred to the figures compiled by Johnson Matthey, precious metals refiner, showing that in 2005, 15.9 tons of platinum were imported into the country, whereas in 2006, 14 tons were imported through November. Interestingly, by value, imports through November 2006 are 12.5 percent higher than for all of 2005.

Arai also pointed out that from 2000 to 2006, the price of platinum increased by 45 percent. “If the price hike is the factor that is dampening the jewelry market, the platinum jewelry market would be reduced by 45 percent, but that is not so. Contrary to complaints, demand is healthy,” he said.

Question Mark

Masahiko Akaike of Orient 4Cs, wholesaler of diamonds and jewelry, also questioned the figures. “Not all platinum goes to jewelry. I believe lots of platinum is used in other industries, such as automobiles.” He said that, although Orient 4Cs has not lowered the gold content of its jewelry, he has seen other manufacturers moving from platinum to white gold, and gold jewelry manufacturers lowering gold content from 18 karat and 14 karat to 10 karat and 9 karat.

A spokesman for Kuwayama Co., Ltd., Japan’s largest neck chain manufacturer/marketer, with sales offices not only in Japan but also in Hong Kong and the U.S., agreed that the market generally is lowering qualities. The reason given is because retailers and department stores would be forced to raise their prices if qualities remained unchanged. At the higher end, however, platinum remains the most desired precious metal.

“There are two sides to a story,” said Hidetaka Kato, chairman of Kashikey Co., Ltd. While sympathizing with the sellers’ predicament, he added “consumers never cease to look for new trends, new products, and if they like them, they buy.”

As for finished platinum jewelry imports, 3.8 tons of platinum jewelry were imported through November 2006, of which 2.2 tons were from the U.S. “Most probably, the bulk of them are shipped from Tiffany’s,” asserted Arai, due to the fact that Tiffany’s wedding bands and marriage rings are very popular among young marrying couples — another sign for a healthy platinum market.

Platinum Export Increases

The export of platinum jewelry also has increased. In 2005, 1.7 tons of platinum jewelry were exported out of the country, of which 1.4 tons went to Hong Kong. In 2006, 2.1 tons were exported through November, of which 1.7 tons went to Hong Kong. Arai suspects that 70 percent of the jewelry shipped to Hong Kong most probably ended up in Mainland China.

While a small number of manufacturers sought palladium as an alternative white metal to platinum, Arai said “it is very unlikely that palladium will become the main metal.” At the International Jewelry Show Tokyo (IJT), held at the end of January, there was only one palladium jewelry marketer exhibiting out of 1,650 exhibitors.

Kato of Kashikey does not see palladium as the alternative, either. “First, the production of palladium is small. When the volume of a commodity is small, the price fluctuates and is volatile. This is not good for jewelry.”

Afflux Co., Ltd. in Osaka manufactures and sells platinum-infused silver jewelry under the brand PT111, in which 11.1 percent of platinum is mixed with silver. “The purpose of manufacturing PT111 is not to lower the cost,” said Mitsuharu Yasumoto, president of the company. “But, by doing this, we have something different to offer to our customers and the cost did come down. With the lowered cost, we are catering to the younger customers.” Afflux’s main lines continue to be in platinum.

Promotion

2007 is the year that the first batch of Baby Boomers go into retirement, setting off a wave of retirements that will continue until 2009. PGI has wasted no time in tackling the phenomenon and is planning a nationwide campaign of television commercials appealing to this generation to buy platinum jewelry. One of the commercials, “Propose Again,” portrays a retiree, played by an actor, talking to his wife as if to “propose again for a new life ahead of them away from work.”

“It’s most touching,” said Akaike. The pieces picked up by PGI for the television commercial are from Kashikey, and although the campaign has not officially started, “I heard that orders from retailers are flooding in at Kashikey,” said Akaike.

The Marketplace

• Reflecting the stronger dollar and euro, foreigners are buying loose stones aggressively, from pointers to large stones of 2-, 3-, 5- and 10-caraters,
I-K colors, high clarity, good makes.
• Domestic prices have become comparable to overseas prices. Replenishing inventories is becoming difficult.
• 4/4 grainers continue to be weak.
• Pointers are steady.
• The market for melees and smalls is one of extremes, with strong demand for high-end, high-quality stones and low- price-point stones. There is little interest in midrange qualities.