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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



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.

• •



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



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)



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



China - a volume demand source for

platinum

11

PGI’s Marketing programme in China

jewellery development worth US$4.3

billion in net demand



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



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



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



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



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

...................................................................................



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%


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%




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)



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



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



Developing an insight

• Marriages’ arranged

• Wedding – family occasion

• Couple find their……

Platinum Day of Love



Platinum Day of Love

Increasing support from the jewellery industry



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



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.

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