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Market Comments 3/19/2015
Mar 19, 2015 6:00 PM
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Weak demand severely restricting trading volume at current price levels. Shortages developing as Indians cut back production of better qualities by about 50%. Markets may stabilize if supply is reduced to lower levels of demand. Caution: Next week’s large sight may destabilize market as it increases supply and reduces liquidity in a highly problematic market with too many diamonds chasing too few buyers. Trade is advised to buy polished instead of rough and stop adding fuel to the fire. Gem Diamonds 2014 revenue +27% to $271M, profit +57% to $33M. India’s Feb. polished exports +4% to $2.3B, rough imports -23% to $1.1B. The Diamond Show opens March 19 at Markthalle in Basel.
Fancies: Ovals and Pears doing well, Cushions and Emeralds stable, Princess and Hearts weak. Prices for curve-shapes improving slightly. Straight-shape fancies not hot. Prices for fine-cut stones are holding up better than rounds. Pears OK. Princess relatively weak. U.S. demand supporting market for commercial-quality fancies, especially for goods under the carat. Larger sizes stable. Far East fancy demand weak. Buyers are very selective and insisting on excellent-shape proportions. Significant price differentials between excellent- and average-cut fancies. Off-make, poorly-cut fancies illiquid and very hard to sell, even at very deep discounts.
Global Comments
United States: Polished diamond dealers expressed concern about current price levels. Suppliers are trying to hold their prices firm to avoid making a loss since their costs remain high. New York dealers feel they’re being squeezed within the trade as they note Indian suppliers are more willing to lower prices. There is steady demand for triple EX diamonds and stable demand for piqué goods. Jewelry retail sales are stable but quiet with no major holidays to boost demand. Jewelers are focused on their bridal lines, while engagement ring sales are stable ahead of the spring and summer season.
Belgium: Sentiment is weak as polished prices continue to soften. There is some optimism for the Basel shows. Dealers note that profit margins have thinned as rough prices have not dropped to the same extent as polished prices. Manufacturers have indicated that it’s better to buy polished than rough. In addition, fewer polished goods are entering the market following cutbacks in polished production by manufacturers during the past few months. There is good demand in Antwerp for 0.50-carat to 0.79-carat, D-I, IF-VVS goods and some post-Hong Kong show demand for below 1-carat, G-J, VS-SI diamonds. Rough trading is stable but a bit cautious ahead of next week’s De Beers sight.
Hong Kong: Polished trading is quiet although there is some expectation that Chinese demand will improve in the coming weeks following the Chinese New Year Spring festival that ended in late February. Diamantaires feel that the recent Hong Kong show was too soon after the festival to attract Chinese buyers. Some dealers expect that retailers may need to replenish inventory soon, particularly since gem-set jewelry sales were reportedly positive during the festival. Trading is cautious and sentiment is relatively weak.
India: Polished trading has slowed as prices continue to soften. There were many overseas buyers in the market but few deals are closing as there is an overall lack of confidence prevailing in the market. Sentiment is being further impacted by rumors that a number of small diamond companies are facing financial difficulties and reports of payments being delayed by Chinese buyers. Liquidity is tight as it usually is before the end of the Indian financial year on March 31. Demand is select and there is very little buying to build inventory taking place. Rough trading is relatively slow although manufacturers expect next week’s De Beers sight to be a relatively large sight. For now, manufacturers are maintaining low polished production. Domestic jewelry retail demand is slow as the wedding season is over and as consumer demand for jewelry tends to be weak at this time of the year.
Israel: Polished trading is relatively slow but stable. There is specific demand for goods with trading focused on supplying the U.S. market. Dealers are hoping the Basel shows will signal decent demand for big stones and better-quality fancy shapes. Niche suppliers are doing better than diamantaires focused on turnover as profit margins remain slim on high-volume transactions. Rough trading is stable ahead of next week’s sight while manufacturers note rough prices remain high relative to polished.
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