China is set for a fall in demand for platinum jewellery by as much as a fifth according to new analysis from Johnson Matthey.

It is thought sales of the precious metal will fall by around 19 per cent to 1.2 million oz in the jewellery sector by the end of 2003 in comparison to last year, as a series of factors have led to difficult economic environment.

The Johnson Matthey interim report suggests that the rapidly rising spot price of the precious metal squeezed manufacturing margins, leading many jewellery manufacturers to delay further purchases.

Elsewhere the impact of the deadly SARS virus forced some smaller suppliers out of the industry, but did not have as severe effect as was first feared.

While a recovery in demand next year will rely on the efforts of Chinese manufacturers to secure improved margins, Johnson Matthey believes the pgm industry remains in good shape in South East Asia.

'In China, demand for platinum jewellery fabrication is projected to slide to 1.2 million ounces - 280,000 ounces lower than in 2002 but still the second highest year of demand on record,' the report said.

'There has not, however, been any discernible weakening of Chinese consumers' demand for platinum jewellery. Leading jewellery stores noted a rebound in platinum sales over the summer once the SARS epidemic had faded,' the report added.

The firm also pointed to the introduction of platinum on the Shanghai Gold Exchange as grounds for optimism in the region.

China accounts for 18 per cent of world platinum demand and nearly half of the global demand for platinum jewellery.