Metals Focus: recovery in Chinese gold-jewelry market to be 'restrained'
Chinese gold-jewelry demand fell sharply due to coronavirus-induced shutdowns of wholesalers in Shenzhen, the hub of the country’s jewelry industry, and recovery will be “restrained,” said Metals Focus. Shops are reopening but there are still restrictions, such as taking temperatures of visitors and checking apps to see whether they have been to high-risk areas. Further, wholesale trade is “lackluster” since retailers built up stocks ahead of the Chinese New Year, only to see sales collapse. Metals Focus estimates that local gold-jewelry consumption “more than halved” in the first quarter. “Moreover, the scope for a swift recovery in Q2 will be restrained due to several factors,” the consultancy said. “First, although the government has started to allow citizens to enter public places...the footfall to jewelry stores will remain low.” Analysts are skeptical that government policies sufficiently improve consumer spending on discretionary items in the short term. Even before the virus outbreak, Metals Focus expected a 6% drop in Chinese jewelry consumption of gold this year due to a shift toward lighter but “more sophisticated” pieces. “On a more positive note, many showrooms and retail shops have been making efforts to improve online shopping and the consumer experience through store live-streaming on social media and e-commerce mobile apps,” Metals Focus said. Analysts also said consolidation across the jewelry industry is likely to accelerate, with leading retail brands already gaining market share in recent years, while smaller regional retailers face increasing financing costs from unsold stocks while dealing with a collapse in sales.