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Rapaport TradeWire August 11, 2016
Aug 11, 2016 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
August 11, 2016
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India IIJS show better
than expected for gold jewelry but weak for diamonds. Manufacturing profit
under pressure with relatively high rough prices and sluggish polished demand.
Rising expectations for Hong Kong show. U.S. supporting the market but large
retailers dominating demand and squeezing suppliers. U.S. independent jewelers
exiting with 460 business closures (+88%) in 2Q. Blue Nile 2Q sales flat at
$114M, profit -9% to $2M. Lucara 2Q revenue +169% to $141M, profit +436% to $46M
after selling 813 ct. rough for $63M ($77K/ct.). Sarine 2Q revenue +45% to
$21M, profit +122% to $6M. U.S. June polished imports flat at $1.7B. Hong Kong
1H polished imports -9% to $8.5B. |
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| Diamonds |
1,241,001 |
| Value |
$7,912,102,824 |
| Carats |
1,333,486 |
| Average Discount |
-30.26% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI™) is the average asking price in hundred $/ct. of the 10 percent best priced diamonds, for each of the top 25 quality round diamonds (D-H, IF-VS2, GIA-graded, RapSpec-A3 and better) offered for sale on RapNet - Rapaport Diamond Trading Network. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
In many ways, India defines our past in the diamond industry and I have no doubt that it will also help define our future.
Bruce Cleaver, CEO of De Beers, speaking at the opening of IIJS in Mumbai
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MARKETS
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United
States: Polished trading quiet.
Jewelers insisting on memo rather than buying for inventory. Larger jewelry
retail chains looking for goods but pushing for higher discounts…
Belgium:
Antwerp diamond bourses
closed until August 22 for summer vacation…
Israel:
Polished trading very
quiet ahead of summer vacation period. Israel Diamond Exchange to close August
15 to 28. Dealers cautious due to slow demand and tightening credit conditions…
India:
Trading at IIJS show
focused on gold rather than diamonds. Gold jewelry demand steady ahead of
Diwali season but jewelers cautious after gold price jumps +26% to INR 31,400/10
gram…
Hong
Kong: Slight
improvement as dealers return from vacation and prepare for September Hong Kong
show.Chinese demand improving for dossiers with retailers looking for
bargains…
Click here for deeper analysis
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INSIGHTS
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Can India Tap its Diamond Jewelry Potential?
The India International Jewellery Show (IIJS), which took place in Mumbai this week, reflected a cautious local diamond and jewelry trade, even if sentiment was better than expected. Suppliers arrived with low expectations as a month-long strike among jewelry retailers, high gold prices, domestic and global uncertainty, and sluggish polished diamond demand had taken their toll...
Click here to continue reading
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INDUSTRY
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Jewelry Business Closures Accelerate
Jewelry
business closures in North America grew 89% in the second quarter, the
Jewelers Board of Trade reported. Some 475 companies in the U.S. and Canada closed
during the period, including 21 via mergers or acquisitions and 12 through
bankruptcy. Most business closures were in the U.S. as terminations there soared
88% to 460. In the first six months of 2016, closures climbed 59% to 867 in
North America and by 60% to 840 in the U.S.
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Sarine Sales Surge on Stronger Market
Sarine
Technologies revenue rose 45% to $20.9 million in the second quarter as an
improvement in rough diamond trading stimulated demand for its manufacturing
equipment. Profit more than doubled to $6 million. The company also sold a record number
of its Galaxy mapping systems. Positive market trends continued to drive
profitability in the diamond midstream during the second quarter, Sarine said.
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Hong Kong Polished Imports Continue to Slide
Hong Kong’s polished diamond imports fell 9% in
the first six months of 2016, according to the Diamond Federation of Hong Kong. Shipments dropped to $8.52
billion, extending a downward trend that has persisted since the start of last
year. A slump in imports from Belgium, India and Israel outweighed a slight
increase in imports from the U.S. Polished exports were flat at $6.65
billion, meaning net polished imports, calculated as imports minus exports,
fell 31% to $1.87 billion.
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De Beers to Launch India Marketing Campaign
De Beers
will run a marketing campaign in India during this year’s Diwali festival (October 30), the
nation’s key selling season. The company initiated the campaign by signing a memorandum
of understanding with the Gem & Jewellery Export Promotion Council at the
India International Jewellery Show in Mumbai this week. The initial focus will
be on smaller diamonds targeting diamond jewelry gifts to young married women.
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RETAIL & WHOLESALE
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Blue Nile Sales Below Expectations
Blue
Nile’s revenue was flat at $113.8 million in the second quarter ending July 3,
below the online jeweler’s forecast of $114 million to $117 million. U.S.
engagement ring sales fell 4% to $62.6 million. Sales slowed in June due to
global market uncertainty after a relatively strong period in April and May,
the company said.
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Pandora Sales Rise
Pandora’s
revenue grew 20% to $648 million (DKK 4.33 billion) in the second quarter
driven by higher sales volume in all its operating regions. Profit jumped 34%
to $182.9 million. Prices were mostly stable, while revenue increased 25% in
local currency terms. Revenue from self-branded stores rose 39% as the company
plans to accelerate the expansion of its concept stores. More than 300 new stores
will be opened in 2016 compared with a previous plan to add approximately 275.
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Michael Hill CEO Steps Down
Mike
Parsell has resigned as chief executive officer of Michael Hill International
after 16 years at the helm of the Australia-based retailer. Parsell (pictured) has seen the jeweler
expand from just three stores in New Zealand when he joined the company 34
years ago to a chain of more than 300 outlets across Australia, Canada, New
Zealand and the U.S. Phil Taylor, chief financial officer, will serve as acting
CEO while the company searches for a permanent replacement.
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Acquisitions Spur Buffett’s Retail Growth
Berkshire Hathaway, the conglomerate chaired by
Warren Buffett, said retail revenue increased 6% to $3.81 billion in the
second quarter of 2016. Growth was driven by acquisitions of an automotive
dealer and a motorcycle gear retailer, while the business unit also includes
jewelry stores Borsheims, Helzberg and Ben Bridge. |
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MINING
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Lucara’s Sales Lifted by Record 813ct. Diamond
Lucara
Diamond Corp.’s revenue nearly tripled to $191.4 million in the first half of
2016 boosted by its sale of the 813-carat ‘Constellation’ diamond for a record-breaking
$63.1 million. The average selling price achieved by the company jumped to
$1,233 per carat from $340 per carat, while profit more than quadrupled to
$63.3 million. The board declared a special cash dividend for the quarter in light of the strong results.
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Cullinan Mine Yields 139ct. Rough Diamond
Petra
Diamonds recovered a 138.57-carat, D-color, type IIa rough diamond, the latest
in a string of large stones found at its Cullinan mine in South Africa. The
company will offer the diamond at its sale in Johannesburg toward the end of
the month. Last month, Petra sold a 121.16-carat
diamond for $6 million, or $49,480 per carat.
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Severe Snow Disrupts Letšeng Operations
Gem
Diamonds said operating costs may rise as severe snowfall and winds restricted
access to its Letšeng mine in Lesotho and caused its processing plant to
operate at reduced rates. The company maintained its production guidance of
107,000 carats to 109,000 carats for the year but cautioned it may need to
re-assess its guidance for ore tonnes treated and costs.
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Diamond Miner Trans Hex Faces Takeover Bid
A
consortium of three Trans Hex Group shareholders joined together to make a
mandatory cash offer to acquire the diamond miner. Cream Magenta 140
Proprietary, Metcap 14 Proprietary Limited and RAC Investment Holdings
Proprietary Limited already hold 72.28% of the miner’s shares and intend to buy
the remainder. Cape Town-based Trans Hex is focused on mining in South Africa
and Angola.
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GENERAL
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Average Engagement Ring Price Falls
The
average price of an engagement ring in the U.S. fell 0.5% to $3,360 in the
second quarter, according to The Wedding Report. The average price of wedding
bands declined by the same margin to $1,246 during the period. The average cost
of weddings followed a similar trend, slipping 0.4% to $26,519, the quarterly
report stated.
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Jewelry Crime Drops as Security Improves
Losses
from crime against the diamond, jewelry and watch industry decreased 7% to
$30.8 million in the first half of the year, according to the Jewelers’
Security Alliance (JSA). The number of crimes fell from 562 to 528. Improved
security and greater sharing of information on crimes and suspects contributed
to the decline, the JSA said.
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IIDGR Strikes Deal with U.K. Trade Body
The
International Institute of Diamond Grading & Research (IIDGR) agreed to
offer members of the U.K.’s National Association of Jewellers (NAJ) preferential
terms at the De Beers subsidiary’s U.K. laboratory. The partnership gives NAJ
members access to a “first-class diamond grading service at the very best
rates,” said Michael Rawlinson, the trade body’s chief executive officer.
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ECONWATCH
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Diamond Industry Stock Report
Sotheby's (+22%) led U.S. industry stocks this past week on strong earnings. Other stateside U.S. shares were generally solid. Mining stocks were more mixed, with Rockwell Diamonds (+11%) leading the gains while Kennady Diamonds (-8.4%) lost value. In India, Gitanjali Gems (+27%) soared but most other industry share prices were lower.
View the detailed industry stock report
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Aug 11 (12:04 GMT) |
Aug 4 (11:25 GMT) |
Chng. |
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| $1 = Euro |
0.90 |
0.90 |
0.00 |
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| $1 = Rupee |
66.84 |
66.93 |
-0.09 |
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| $1 = Israel Shekel |
3.81 |
3.83 |
-0.01 |
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| $1 = Rand |
13.37 |
13.75 |
-0.38 |
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| $1 = Canadian Dollar |
1.30 |
1.31 |
0.00 |
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| Precious Metals |
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Chng. |
| Gold |
$1,345.30 |
$1,360.28 |
-$14.98 |
-1.1% |
| Platinum |
$1,171.75 |
$1,159.50 |
$12.25 |
1.1% |
| Silver |
$20.16 |
$20.40 |
-$0.24 |
-1.2% |
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| Stock Indexes |
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Chng. |
| BSE |
27,859.60 |
27,714.37 |
145.23 |
0.5% |
| Dow Jones |
18,495.66 |
18,355.00 |
140.66 |
0.8% |
| FTSE |
6,845.56 |
6,720.87 |
124.69 |
1.9% |
| Hang Seng |
22,580.55 |
21,832.23 |
748.32 |
3.4% |
| S&P 500 |
2,175.49 |
2,163.79 |
11.70 |
0.5% |
| Yahoo! Jewelry |
657.11 |
997.54 |
-340.43 |
-34.1% |
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INDIA MARKET REPORT
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Polished Trading Activity
Trading at IIJS show
focused on gold rather than diamonds. Gold jewelry demand steady ahead of
Diwali season but jewelers cautious after gold price jumps +26% to INR 31,400/10
gram. Polished market quiet with steady U.S. demand from major retailers.
Manufacturing profits squeezed as rough remains expensive and polished remains
sluggish.
Read the Polished Diamond Trading Report |
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