FYI. Some insight into the japanese market for platinum...
Platinum Market Observations
First-hand Commentary by Industry Experts
Focus On Platinum in Japan
This interview features insights by Mr. Hitoshi Kosai of Tanaka Kikinzoku Kogyo K. K. (or "TKK"). TKK is the leading gold refiner, bar manufacturer, wholesaler and retailer in Japan... The company focuses on precious metals refining and the manufacture and marketing of precious metals products. In addition to its refining and trading activities, TKK has a well-established retail presence throughout Japan, with 151 jewelry stores, 120 department stores, 7 banks and 5 security houses, and 1,122 employees.
PGI: What is your outlook for Japanese platinum demand in 1998?
TKK: As for jewelry demand, which accounts for about more than 60% of the total demand, generally speaking, jewelry industry here in Japan is not in a good shape at the moment due to the troubled economy and with the weakness of Japanese jewelry companies. As for autocatalyst demand, even if there is a tendency that most car companies are shifting from conventional Pt-Pd-Rh catalysts to Pd-rich catalysts, platinum is still an inevitable precious metal for catalysts. We do not expect a big decline in demand. As for the glass industry, in addition to CRTs, demand from LCDs for portable PCs is still expanding. We expect this trend to continue.
In summary, jewelry will be a little bit down from 43 metric tons (mt) to around 41 mt. Autocatalyst demand: from 7.9 mt to 8.5 mt, a little bit up, Glass: from 2.5 mt to 2.7 or 3.0 mt.
PGI: Is platinum less expensive now for the average Japanese consumer than it was in early October? If so, how has that affected the platinum jewelry market?
TKK: In total, the price of platinum for the Japanese consumer is slightly higher than last year. October is a month for fabricators to buy metals for manufacturing Christmas sale products. In other words, they have to buy metals anyway, even if the price is too high. Most of retailers are selling products at the prices based on their purchasing prices which is not related to less expensive prices of November and December of 1997. Therefore prices do not affect jewelry sales. Sales results will depend upon consumers interest.
PGI: Tanaka Kikinzoku's Monthly Accumulation Plans are extremely successful, particularly the Platinum Accumulation Plans, or PAP, which allow investors to put a monthly amount into account to be invested in platinum, with the option of withdrawal upon demand in coin, bar, or jewelry form. Could you describe the reasons for their success and how they work?
TKK: TKKs Gold Accumulation Plan (GAP) sales commenced in 1980 and we have continually worked to improve the system, with the result that TKK counts more GAP members than any other company in Japan. TKK was very early to market with Platinum Accumulation Plans (PAP) sales, starting 15 years ago in 1984, and seven years have already passed since the switchover to the new system ("new PAP") in 1991. Competitors began arriving on the scene in 1993. (The original TKK system did not allow for the platinum accumulated during the contract period to be withdrawn as ingots or coins, or for selling.) The secrets to our success rely on the following specific strategic actions:
1. A complete revision of the PAP service made it possible for the new PAP to attract new customers from a much broader range of society. The ability to exchange accumulated platinum for the equivalent value of platinum jewelry was very successful in attracting younger customers, especially women (just under 45 % of our customers are women).
2. We believe that the greatest reason for PAP to have gained such a firm place in the Japanese market is the promotional program in cooperation with PGI since the new PAP was released. With the advantage of being first to market and the success of these sales promotions mentioned, TKK has outpaced its competitors and hasbeen able to secure an estimated 80-90% of the PAP market. We have conducted a publicity campaign to differentiate platinum from gold, geared toward Japanese investors who tend to be unfamiliar with platinum. We had comparative advertisements between gold and platinum, with slogans such as "Go beyond gold, save with platinum", or "If you’re going to save, this time select platinum." We also differentiated our sales technique and gave premium gifts only to PAP members to encourage new membership.
3. Since gold tends to be the precious metal favored among investors, it has taken some time to develop an independent market for platinum. With this in mind, we decided to acquire PAP members from the ranks of GAP members who already have an interest in gold. That TKK has the largest number of GAP members in Japan has made this strategy all the more effective.
PGI: What do you expect demand for platinum bullion coins to be in Japan for 1998?
TKK: From 1992 to 1997, the platinum bullion market has shrunk from 21,000 ozs. to 16,000 ozs. with a share of 70% to 80% of Platinum Maple Leaf coins and rest of Platinum Koala coins. After the launch of the Platinum Eagle in November, 1997 in Japan, the market doubled for 3 months. However, sales in February are not so good as we expected. We estimate the market size will be as big as 30,000 ozs. to 33,000 ozs. in 1998...
PGI: The Russian supply shortage caused leasing rates to spread higher during the summer of 1997. Do you expect this situation to arise again in 1998 and beyond?
TKK: We have no dependable information on Russian supply of PGMs so far. We do not like to expect that the same situation will arise again this year too. We hope that the economical and political situation in Russia will allow the people concerned to sit with counterparts on negotiations of supply of PGMs for 1998.
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DRT |
