Silver Costs Soar, Impacting World’s Leading Jeweler
Recent surges in silver prices have led the world’s leading jeweler, Pandora, to explore alternatives. The company typically utilizes more than 300 tons of silver annually for its charm bracelets and other jewelry. However, the significant increase in silver prices is prompting a reevaluation of its business strategy.
Rising Silver Costs Impacting Jeweler’s Strategy
Silver prices have more than doubled over the past year, reaching nearly $80 an ounce. This price surge surpasses the rise in gold and even the more gradual increase in platinum, which is currently priced around $2,100 an ounce. The steep increase puts Pandora at a financial disadvantage, as the company heavily relies on silver as a raw material.
Pandora’s Reassessment of Raw Materials
Pandora’s new CEO, Berta de Pablos-Barbier, expressed concerns regarding the company’s dependence on a single commodity. In a statement to the New York Times, she highlighted the risks associated with this reliance on one raw material. To counter these challenges, the jeweler will launch a new series of platinum-plated jewelry made from an alloy. The plan is to transition at least half of its current silver products to this alternative within a year.
Product Durability and Cost Management
The introduction of platinum plating aims to not only reduce dependence on sterling silver but also maintain price accessibility for core customers. Executives believe the underlying alloy will help control costs while offering customers a more durable product, as platinum is known for its resistance to corrosion and tarnishing.
Challenges from Market Dynamics and Trade Policies
This strategic change comes as Pandora faces sluggish consumer demand and challenging U.S. trade policies. The company manufactures its goods in Thailand and is set to establish another site in Vietnam. Unfortunately, these locations are affected by tariffs imposed by the previous U.S. administration, which can reach around 20% on imported goods.
Since the introduction of these tariffs, Pandora’s stock has plummeted, losing more than half its value alongside the spike in silver prices. The company has hedged its silver needs for 2026 at more favorable rates, but once those contracts expire, the effectiveness of its pivot to platinum will be critical for its profitability.
Forecasting Profitability Amid Price Fluctuations
According to the Wall Street Journal, without intervention, Pandora could have seen a decline in its profit margin by 11% due to climbing silver prices. However, with the newly outlined strategy, the company anticipates maintaining a profit margin of 21% or greater, as reported by CNBC. This shift marks a significant transformation in Pandora’s approach to maintaining affordability and competitiveness in the jewelry market, particularly in response to rising silver costs.
