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Market Comments 3/5/2015
Mar 5, 2015 6:00 PM
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Hong Kong show just meets low dealer expectations with few Chinese buyers. Chinese middle class growing with continued demand for under-the-carat lab-graded stones, but excess inventory is limiting sales. Govt. anti-corruption campaign against conspicuous consumption sharply reducing demand for large expensive stones. Large 3ct+ diamonds not liquid at current price levels. Chow Tai Fook’s gem-set jewelry China same-store sales +62% over Chinese New Year, HK/Macau -17%. Indian cutters stressed about profitability as market liquidity evaporates. De Beers Feb. sight estimated at $550M, average price -2%. U.S. Jan. jewelry sales -2% to $4B. India’s State budget disappoints gem trade.
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: Diamond trading in New York was relatively quiet as the focus of the trade shifted to the Far East during the Hong Kong shows. Many goods were sent to Hong Kong for the show with decent representation in the Diamond Dealers Club (DDC) pavilion. U.S. demand is stable, with good demand for commercial-quality piqué goods. Consumer confidence has improved but this has not yet translated to strong retail demand for jewelry. Consumers continue to spend but with tighter budgets, and are consequently shifting to lower-end goods. Jewelry retailers are maintaining low inventory levels and are buying only what they need to fill existing orders.
Belgium: The market in Antwerp is quiet with many polished traders away at the Hong Kong Show. Sentiment has improved slightly but there remain deep concerns about liquidity levels and the lack of bank financing to the industry. The Antwerp World Diamond Centre (AWDC) this week held a banking symposium to find solutions and ideas for new sources of credit. Rough trading also improved slightly after the Diamond Days fair last week and as De Beers reduced prices slightly at the February sight. However, profitability remains tight and is a concern for manufacturers.
Hong Kong: Global diamond trading has been focused on the Hong Kong shows that took place this week. The diamond exhibit was larger than in previous years with more diamond suppliers participating in the event. Trading was quiet on the first day of the show but improved later during the week. There is good demand for 0.50-carat to 0.90-carat, G-K, SI diamonds, while demand for large stones above 3 carats is weak. Traffic was lighter than expected with many Chinese wholesale buyers still assessing their requirements after the Chinese New Year Spring Festival. Initial reports from the season signal good gem-set jewelry sales in Mainland China but very weak sales in Hong Kong and Macau.
India: There is little activity in Mumbai with most diamantaires, and many local buyers, at the Hong Kong show. Sentiment is cautious as manufacturers’ profit margins are low, and due to reports that some companies are facing financial difficulties. There is some local demand but availability is scarce due to the ongoing show. Suppliers held their prices relatively stable at prevailing low levels at the show and there was no panic selling to raise liquidity. There is steady demand for below 1-carat, H-M, SI2-I2 diamonds and parcel goods. In fancy shapes, there is stable demand for pear, oval and marquise cuts below 1-carat, SI-I. Cushion cuts above 0.50-carat are also moving. In rough trading, there is steady demand for rejection goods and rough that yields SI-clarity polished. However, polished production continues to be below regular capacity.
Israel: Polished trading is stable and sentiment has improved with a large contingent of suppliers at the Hong Kong show. Dealers reported that sales at the show were not spectacular but met their low expectations. There was good demand for nice SI-clarity diamonds, while triple EX goods continue to garner 5 percent to 7 percent premiums over non-triple EX goods. Asian demand for high-end fancy shapes has softened slightly. Dealers note that U.S. demand is stable.
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