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Rapaport TradeWire December 19, 2014
Dec 18, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Dec. 19, 2014
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Warning: Polished prices under continued pressure with sellers lowering prices as demand for cash exceeds demand for diamonds. While some hot spots persist, overall market sentiment is negative. Rough prices coming down as sightholders reject about 20% of overpriced rough at estimated $600M De Beers Dec. sight. U.S. jewelry retailers hoping last-minute Christmas sales will boost mediocre holiday season. Widespread discounting with U.S. jewelry Nov. CPI -5%. Dominion’s 3Q revenue +50% to $222M, profit $34M vs. loss of $6.5M last year. Belgium’s Nov. polished exports -8% to $1B, rough imports +14% to $1.2B. Turkey scraps 20% diamond import tax and 18% VAT in bourse.
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RapNet Data: Dec. 18
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| Diamonds |
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1,562,272 |
| Value |
$7,908,764,022 |
| Carats |
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1,514,768 |
| Average Discount |
-28.6% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
The Panama Gem & Jewelry Center, the new home of the Panama Diamond Exchange (PDE), is ready for business, and right on schedule, we are happy to say. After detailed planning, a very ambitious building program and hard work by all concerned, it is possible to declare that our targets have been met. It is certainly the newest diamond and jewelry-dedicated structure on the face of this earth and also one of the most attractive.
Eli Izhakoff | Panama Diamond Exchange
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.
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INDUSTRY
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De Beers Sight Estimated at $600M
De Beers December sight closed with an estimated value of $600 million. Minor adjustments to prices and assortments were reported in different categories, but no significant changes were noted. Sightholders and brokers reported that a large number of boxes were deferred, with the highest estimate of the amount of goods left on the table -- reaching 25%.
Sightholders observed a "sour mood" taking shape, especially since the previous two sights held prices up, further inhibiting profit growth on polished goods. De Beers contends that rough prices have increased 7% this year.
De Beers temporarily relaxed sightholder rules to allow manufacturers that operate under beneficiation agreements to defer up to half their goods until the next sight. Alternatively, these manufacturers could choose to defer one box per rough category within a six-month period, as is traditionally the case.
De Beers said it had adjusted the rules in response to feedback from these manufacturers and that they would not be able to meet their plant production targets set earlier in the year in their intention to offer (ITO) agreements. The market for polished is currently weak, and overall rough trading on the secondary market is slow.
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ALROSA Improves Liquidity
ALROSA held $3.6 billion in bank loans and public debt as of December 1, including debt maturing in 2015 -- $600 million of loans from VTB Bank, $348 million (RUB 20 billion) of commercial ruble bonds, series 20–23, and exchange-traded ruble bonds, series BO-01 and BO-02. To improve liquidity, ALROSA extended the repayment terms of outstanding loan contracts worth $600 million with VTB Bank until 2018. To create a liquidity source for repayment of commercial ruble bonds, series 20–23, and exchange-traded ruble bonds, series BO-01 and BO-02, ALROSA signed a $300 million loan contract with UniCredit Bank, maturing in 2017. ALROSA ensured repayment sources for short-term loans and borrowings to mitigate debt market access risks in 2015.
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RETAIL & WHOLESALE
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Jewelry Sales +12% in China
China's retail sales rose 11.7% year on year to $379.33 billion (CNY 2.35 trillion) in November, according to the National Bureau of Statistics of China. Retail sales for the first 11 months of the year were up 12% to $3.82 trillion. Online retail sales for the period have risen 55.9% to $62.35 billion.
The government reported that retail sales of gold, silver and jewelry in November jumped 11.5% to $3.75 billion. However, the sector is down 0.7% year on year at $43.3 billion for the year-to-date and it was the only major retail category to record a sales decline.
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U.S. Jewelry Price Index Drops
The U.S. consumer price index (CPI) for jewelry declined 5% year on year to 166 points in November and the reading slipped about 5 points from October's index. Jewelry price inflation often reflects heavy promotional activity at the retail counter during November and December due to the Christmas shopping season; however, this November drop of 8.81 points from one year ago was the steepest since records began in 1986.
The CPI for watches, meanwhile, was flat in November at 121.33 points, but the reading was 3 points lower than October's index.
Market prices for precious metals and diamonds during November remained under pressure with platinum prices running about 9% lower than one year ago, while gold prices were basically flat. However, the RapNet Diamond Index (RAPI™) -- the global benchmark for polished prices -- plummeted 7.5% year on year for 1-carat diamonds. RAPI for 3-carat diamonds fell 5.5% and RAPI for 0.30-carat diamonds slipped 0.4%, but RAPI for 0.50-carat polished goods increased 3.2% compared with one year ago.
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Jewelry Gifts Score With 17% of U.S. Shoppers
Slightly more than 9% of U.S. consumers who purchase gifts for the Christmas festival have completed their shopping, according to an updated survey conducted by Prosper Insights & Analytics for the National Retail Federation (NRF). Overall, consumers said that a little more than half of their shopping was completed as of December 10.
Across all gift categories, 17% of shoppers confirmed that they had already purchased a jewelry gift (or precious metal accessory) for Christmas. The figure was off by one-half a percentage point from December 2013 and down from 20.8% in December 2012. Jewelry gift spending was roughly the same for all demographic groups -- in the range of 15.1% to 18.7% -- with the exception of those 25 to 34 years of age for which 23.5% have already made a jewelry purchase.
The most popular gift purchases, so far, have been clothing (51.3%), toys (36.3%), books, CDs, DVDs or video games (35.1%) and gift cards or certificates (33.5%), according to the study.
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Online Sales +15% in U.S.
U.S. online retail sales rose 15% year on year to $42.451 billion for the first 44 days of the Christmas season, through December 15, according to digital metrics firm comScore Inc. The most recent workweek, beginning with December 8, which is called Green Monday, posted a 12% increase as sales totaled $8.618 billion from desktop spending. The period also marked a second consecutive week with all five workdays reaching sales of at least $1 billion, comScore stated.
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Anticipated December Jewelry Spending Flat
IBISWorld anticipates that U.S. Christmas season gift spending will increase 1.8% year on year to $54.79 billion in December.
Jewelry and accessory gift spending is expected to increase 0.2% to $5.51 billion this month compared with one year ago. The personal care and cosmetics segment is expected to have the largest increase, up 3.3% to $5.7 billion. Total spending on gifts, food and decorations should increase 2% to $70.9 billion in December, according to the group. IBISWorld concluded that consumers are likely to hold back on buying extravagant gifts and that heavy retail promotions have backfired as the Internet reduces the need for consumers to rush to find good offers.
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Birks Closes $33M Loan
Crystal Financial LLC, a portfolio company of Solar Capital Ltd., closed a $33 million second-lien term loan for jewelry retailer Birks Group that matures in August 2018. The facility refinanced a Birks Group existing term loan and provided additional flexibility to the jeweler as it continues to implement growth plans, open new stores and launch new merchandise offerings.
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R2Net - JamesAllen Secures $25M
R2Net - JamesAllen.com secured $25 Million in funding from Israel Growth Partners (IGP). The funds will be used in support of R2Net’s aggressive growth strategy, following the acquisitions of Segoma Inc. and Brio Animation Studio Ltd. and launch of JamesAllen.com's store-in-store joint venture with Sears. JamesAllen.com seamlessly integrates smart phones, tablets and PCs, as well as virtual kiosks, which enables the digital generation to easily shop for diamond jewelry. R2Net also operates a business-to-business platform for online diamond sales.
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Gabriel & Co. Debuts New Collections
Gabriel & Co. unveiled five new fine jewelry collections, curated by its global Style director, Hal Rubenstein, at Padis Jewelry in San Francisco. Each piece is hand made with 14- and 18-karat gold, sterling silver, diamonds and colored gemstones.
Rubenstein designed the jewelry to seamlessly transition between day and evening wear, under the philosophy that beautifully crafted jewelry is not to be stored and saved for specific occasions, but worn every day.
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Bulgari's Click-and-Collect Starts at Selfridges
Bulgari launched an exclusive click-and-collect partnership with Selfridges' flagship London store on December 11 to provide customers with the opportunity to purchase Bulgari products online, via Selfridges' ecommerce platform, and collect the items in the store. Some of Bulgari's most iconic collections are available, including Diva, MVSA, Serpenti and B.Zero1. The most expensive item available so far is Bulgari's Serpenti diamond necklace, which retails for $110,000. Selfridges stated that this new partnership enhances its omnichannel strategy.
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Nouvo Mode Partners With Frederick Goldman
Frederick Goldman Inc. appointed Nouvo Mode to represent it in Canada with a sales and distribution agreement for the Goldman, ArtCarved and TRITON brands. Nouvo Mode is a full-service sales and marketing organization that plays a strategic role in the development and growth of designer brands within the luxury market. Created in 2007, Nouvo Mode has established itself as a growing force and currently they represent Alex and Ani, Ernst Benz, Scott Kay, Hera, Breuning and more.
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GENERAL
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Turkey Ends Polished Diamond Tax
Turkey abolished a 20% special consumption tax on polished diamonds with a new tax regime that passed in September.
In addition, polished diamonds being traded in Borsa Istanbul Diamond and Precious Stone Market is exempted from an 18% value added tax (VAT). Diamonds traded in Turkey outside of the exchange will be subject to the VAT. The Borsa Istanbul, which has 122 members, expects that its membership will increase as a result of the new tax scheme since it encourages company registration.
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AWDC Prepares Cote d'Ivoire for Rough Exports
The Antwerp World Diamond Centre (AWDC) is helping Cote d'Ivoire adhere to the Kimberley Process and resume their diamond trade. The AWDC trained three Ivorian senior officials to become diamond experts and gain the necessary knowledge to estimate diamond values. In addition, officials were briefed on the stringent regulations of the Kimberley Process. Cote d'Ivoire was banned from exporting rough until just this year after a decade of violence came to an end. Cote d'Ivoire will launch its new controls on January 1 and the country has the potential to produce between 150,000 to 200,000 carats of rough diamonds annually, representing a value of $25 million.
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Panama Center Welcomes New Tenants
The Panama Gem & Jewelry Center welcomed 14 trading firms in the first phase of its new building. The center expects 45 multinational firms to eventually occupy the space. Among the major diamond companies taking up residence are Kiran Gems, Diarough NV, Rosy Blue, Bhavani Gems, Interjewel, Jewelex, M. Suersh, the Niru Group, ILI Diamonds of the A. Rachminov Group, Atit Diamonds of the Shairu Gems, Dianco, Ofer Mizrahi Diamonds, S. Schnitzer Diamonds and S. SB Bichachi Diamonds Group.
In addition, the Panama Diamond Exchange (PDE) and CIBJO joined forces to provide educational programs for the gemstone and jewelry sectors across Latin America, instilling the principles of corporate social responsibility.
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Two Executives Depart Gucci
Patrizio di Marco, the CEO of Gucci, will leave the luxury brand on January 1 and be succeeded by Marco Bizzarri. His notice of departure comes a week after the resignation of Michele Sofisti, the CEO of Gucci's jewelry and watch division. Marco was appointed to serve as interim head of jewelry, while Gucci recruited a replacement for Sofisti. In addition, the creative director of Gucci, Frida Giannini, announced her departure for the end of February after showing the fall and winter 2016 women's wear collection on February 25. A new creative director will be appointed at a later date, according to parent company Kering.
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MINING
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Dominion Diamonds Profit Reaches $34M
Dominion Diamond Corporation reported that production, sales and profit were all stronger than expected during the third quarter that ended on October 31. Profit rose to $33.6 million compared with a loss of $6.5 million one year ago. Consolidated net income attributable to shareholders totaled $25.5 million or 30 cents per share. Rough diamond sales jumped 50.1% to $222.3 million, cost of sales rose 7.3% to $147 million and gross margin increased to 33.9% compared with 8% one year earlier.
Diavik's diamond sales rose 52% to $80.4 million, although the average price fell $2 to $116 per carat. Ekati's diamond sales rose 49% to $141.9 million with an average price of $310 per carat.
Dominion Diamond stated that it had unrestricted cash and cash equivalents of $288.8 million as of October 31 and restricted cash of $112 million. Rough diamond inventory totaled 1.9 million carats, with a market value of approximately $350 million, of which approximately $185 million represented inventory available for sale, with the remaining $165 million being sorted. Working capital totaled $629.5 million, up from $572.1 million as of January 31.
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Lucapa Prepares Lulo; Plans Rough Sale
The Lucapa Diamond Company will being mining next month at its Lulo alluvial concession in Angola, where the miner plans to target high-grade diamond ore bodies. During the first phase, Lucapa anticipates that ore bodies hold approximately 35 carats per 100 tonnes (cpht), while the Lulo project overall reflected ore-grade of 26 cpht, with a large proportion of type IIa stones.
Lucapa plans to sell a third parcel of Lulo diamonds, containing more than 1,000 carats, in February through the Angola diamond marketing agency, SODIAM. The largest stone the sale will offer is a 10.15-carat, type IIa that is valued at more than $180,000, or close to $18,000 per carat.
To date, Lucapa has sold two parcels of Lulo rough stones, consisting of 867 carats, for $4.9 million (AUD 6 million), at an average price of close to $5,700 per carat.
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Stornoway's Earnings Reach $12M
Stornoway Diamond Corporation recorded net earnings of $11.7 million in the second fiscal-quarter that ended on October 31, compared with a loss of $1.6 million one year earlier. Net earnings were impacted by line items that were not reflective of underlying operating performance, including changes in the fair value of a derivative and unrealized gains and losses from foreign exchange rates. Cash and cash equivalents fell to $387.9 million compared with $438.3 million at the end of the previous quarter; however, cash resources remained sufficient to cover planned mine development expenses at the Renard diamond project and financing and corporate costs during calendar year 2015.
Construction mobilization at Renard continues to proceed rapidly, with incurred costs and commitments at the close of the second quarter totaling $179.7 million, or 22.1% of budget, according to the company.
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Rockwell's Sales +47%
Rockwell Diamonds reported that revenue improved 47% year on year to $15.76 million in the third quarter that ended on November 30. Earnings will be reported on January 13, 2015. The junior miner sold 13,759 carats during the period, reflecting an average price of $1,146 per carat, which was 35% lower from one year earlier. The company stated that the average price per carat was lower, in part, because there were fewer large diamonds in the sales mix. Diamond production rose 15% to 10,228 carats in the third quarter.
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STATS
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Belgium
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Nov. $Mil. |
%Chng. |
YTD $Mil. |
%Chng. |
| Polished exports |
$1,045 |
-8% |
$13,331 |
4% |
| Polished imports |
$932 |
-7% |
$12,894 |
4% |
| Net exports |
$113 |
-17% |
$437 |
9% |
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| Rough imports |
$1,239 |
14% |
$13,879 |
14% |
| Rough exports |
$1,409 |
9% |
$14,439 |
9% |
| Net imports |
($170) |
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($560) |
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| Net diamond account |
$284 |
-16% |
$997 |
-36% |
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ECONWATCH
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Diamond Industry Stock Report
U.S. retailers somewhat higher as investors hope for a last-minute consumer shopping burst, JCP (+12%), Blue Nile (+6%) leading gains. Far East and European shares under pressure except for Luk Fook (+3%) and Damiani (+3%). Indian shares mainly lower, led by Rajesh Exports (-12%). Mining shares mixed with Stornoway (+11%) way ahead, and Stellar (-6%) and Peregrine (-6%) leading declines. View the extended stock report.
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Dec. 18 |
Dec. 11 |
Chng. |
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| $1 = Euro |
0.814 |
0.807 |
0.007 |
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| $1 = Rupee |
62.99 |
62.54 |
0.5 |
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| $1 = Israel Shekel |
3.94 |
3.92 |
0.02 |
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| $1 = Rand |
11.56 |
11.64 |
-0.08 |
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| $1 = Canadian Dollar |
1.16 |
1.15 |
0.01 |
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| Precious Metals |
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| Gold |
$1,198.20 |
$1,225.30 |
-$27.10 |
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| Platinum |
$1,195.00 |
$1,236.00 |
-$41.00 |
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| Stock Indexes |
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Chng. |
| BSE |
27,126.57 |
27,602.01 |
-475.44 |
-1.7% |
| Dow Jones |
17,778.27 |
17,596.34 |
181.93 |
1.0% |
| FTSE |
6,466.00 |
6,461.70 |
4.30 |
0.1% |
| Hang Seng |
22,832.21 |
23,312.54 |
-480.33 |
-2.1% |
| S&P 500 |
2,061.23 |
2,035.33 |
25.90 |
1.3% |
| Yahoo! Jewelry |
1,230.53 |
1,241.67 |
-11.14 |
-0.9% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Trading activity is slow and buyers remain very price sensitive especially with growing concerns over a rising dollar. The market is facing tight liquidity. Read the full report.
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