Global Markets
Business was slow in the U.S. during this second week of the traditional vacation period for diamond dealers. Those retailers that remained open reported better than expected sales, attributing this to other vendors being closed. As usual, bridal constituted the majority of the traffic. However, some retailers reported higher consumer interest in studs, right-hand rings and pendants, which is a good sign for the fashion jewelry sector. Rounds and cushions appear to be the most coveted shapes, in 1.20-1.50 ct., F-H, SI and VG-EX makes.
The market in Belgium is stable. There are indications that rough prices are reversing in some areas, although price hikes at this week’s Diamond Trading Company (DTC) sight has people confused. Nevertheless, there is still demand for rough, and dealers are buying. In the polished market, there is good demand for 1.00-2.00 ct., D-G, VS-SI goods. Stones of 0.30-0.90 ct., D-H, VS-SI are also selling, while 2.00 ct., D-G are selling in VVS1-VS2 clarities. Also very strong are 0.50 ct., triple Ex goods. In fancies, princess-cut stones are emerging as the hot item again.
The market in Israel is steady but slowing down as the August vacations approach. There is a shortage of rough on the market, causing rough stones to sell at high prices, which is deterring people from buying. Profit margins on polished goods remain very slim, if they exist at all. There is demand for 0.90-1.50 ct., H-K, SI goods, as well as for collection VVS2-VS1, D-E. Cushions are also in demand.
In India, activity has slowed as buyers are resisting high asking prices. Exchange rate volatility continues to impact local demand, as the weakness of the rupee against the U.S. dollar adds to the expense of buying diamonds. The market is very price-sensitive and is expecting some downward correction for polished stones. Activity in the rough market has also been slow, although price increases at the DTC sight have caused a stir. Dealers are expecting an influx of Russian goods soon. Nevertheless, laborers are still hesitant to return to factories, despite recent wage increases, for fear of another crash in the market and a lack of job security.
The market in China is stable, as demand remains strong for round, 0.30-1.10 ct., D-H, VS triple Ex and double Ex goods. I-J, VVS goods appear to be selling better outside the Shanghai market. Uncertified stones below 0.20 ct., H-I, SI are also selling well. Promotional, round, 0.30 ct., K-L, SI items have also gained a fair share of the market recently.
Buyers are becoming attracted to the Hong Kong market, as it appears they can get better deals there than at the cutting centers of Antwerp and Ramat Gan. Shortages are still apparent in the market. Trade continues to be seasonably quiet through the summer months, and the market is only expected to pick up closer to the September show. Demand remains focused on 0.50-2.00 ct., G-I, VVS and 0.50-2.00 ct., D-F, SI goods.
Between The Lines
The increases in rough prices seen in the past few months appear to be tapering off and the rush for rough seems to be stabilizing. It is little wonder, therefore, that initial reports from the DTC sight this week revealed that sightholders were left confused at the price hikes that the De Beers company imposed. We’ll have more about the sight in next week’s report, but for now it appears that DTC is again one step higher on its prices than the rest of the market. Various reports this week confirmed the recent rise in rough prices — most significantly, the results that Gem Diamonds, owner of the high-end Letseng mine, published in its quarterly trading report. The report showed that prices from Letseng, considered the highest value per carat mine in the world, rose to $1,496 per carat in the second quarter, up 47 percent from the previous quarter. Gem showed similar increases at its Ellendale mine, and Rockwell Diamonds reported that average prices at its monthly tenders grew from $531 per carat in March to $585 in May, to $700 in June and $835 in July. While the increases are viewed by some in the industry as a correction from the exaggerated declines that were experienced when the crisis hit, further such increases will fuel concerns that another rough bubble is developing.
Shrenuj & Co. bought out a diamond manufacturing factory in Botswana to become one of the 16 DTC sightholders in the country. Sources indicated that the factory in question was that of DDA Botswana. While mining stopped for three months in Botswana, it appears the country’s beneficiation industry was only slightly affected. Reportedly, just 10 percent of the workforce was laid off during the downturn, and DTC Botswana has remained fully operational, with its full complement of 462 employees staying at the company. The source said that 13 of the country’s 16 licensed manufacturers are operating at the moment, with one due to begin in August. The Shrenuj buyout ensures that 150 jobs will not be lost and is a strong vote of confidence for the prospects of manufacturing in Botswana.
Indian company Gitanjali Gems increased its profile in the U.S. by acquiring 51 percent of diamond jewelry maker Diamlink. This follows its purchases, in the past two years, of retailers Rogers and Samuels Jewelers. With annual sales already over $1 billion, even through the recessionary fiscal 2008-09, Gitanjali is firmly established as a global diamond and jewelry powerhouse, and one should expect more such transactions from the company.
At the retail level there was no reason to celebrate as department store sales in the U.S. reported a sales decline of 9.4 percent for June. The major retail chains broke the trend of posting double-digit sales declines, dropping only by low single-digit decreases during the month. In particular, luxury retailers Saks and Nordstrom saw sales fall 4 percent and 6 percent, respectively, and JC Penney reported improved jewelry sales. Consumers remained skeptical about future prospects for the U.S. economy, as reflected by the consumer sentiment index, which fell 8.8 percent in June, according to the monthly University of Michigan survey.
Quote of the Week
With the diamond industry in somewhat of a state of limbo through the summer months of July and August, we take time to assess our situation and remember that, “When things are bad, we take comfort in the thought that they could always be worse. And when they are, we find hope in the thought that things are so bad they have to get better.” — Malcom S. Forbes
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