(Yicai) June 5 -- Chow Tai Fook Jewellery Group has halted operations at its Shenzhen plant, with the Hong Kong jewelry brand under pressure amid rising gold prices.

The company said it would restructure some departments at the facility in Beishan Industrial Park and move some production units to its Shunde factory in Foshan, also in Guangdong province.

The move will allow Chow Tai Fook to improve operational efficiency and respond more flexibly to changes in the consumer jewelry market, it said. The company is handling personnel matters and making compensation in an orderly manner, according to a report today by Shell Finance, a unit of Beijing News.

An earlier rumor on social media said that Chow Tai Fook would start the shutdown in Shenzhen from June 1, due to changes in the market environment, as well as the company’s development strategy and business and production needs.

Analysts said the shutdown may be related to high gold prices. The retail gold price has surpassed CNY700 (USD96.59) per gram recently and consumers have become more hesitant about buying, putting jewelry companies under pressure.

The high prices are also causing risks in the wider gold processing industry. The rise in raw material costs and lower shipments for jewelry processors have led to some small and mid-sized processing businesses even stopping work and taking a vacation, the China Gold Association said in late April.

Chow Tai Fook has four production bases in China, with one each in Hong Kong, Shenzhen, Foshan, and Huangpi district in Wuhan, Hubei province. The Shenzhen facility mainly focuses on research and development. The company has over 28,000 employees, 83.7 percent of whom are in the Chinese mainland.

In the six months ended Sept. 30, Chow Tai Fook’s revenue rose 6.4 percent from a year earlier to HKD49.5 billion (USD6.3 billion), and profit jumped 36 percent to HKD4.6 billion (USD588.9 million). 

Editor: Tom Litting