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Rapaport TradeWire July 24, 2015
Jul 23, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
July 24, 2015
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Diamond markets slow as dealers take summer vacation. Shortages due to significant decline in manufacturing increasing demand for recycled diamonds, especially larger sizes. Few new goods expected for Christmas. De Beers July sight much lower than expected at $200M with some 65% of goods rejected. Namibia gov’t to sell 15% of Namdeb production outside of De Beers in new 10-year supply deal. ALROSA 1H production +13% to 18M cts., prices -6%, sales -22% to $2.1B. India June polished exports -2% to $1.9B, rough imports -11% to $1.5B. Swiss watch June exports +3% to $2B. James Riley resigns as Gem-A CEO.
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RapNet Data: July 23
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| Diamonds |
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1,376,936 |
| Value |
$8,523,827,047 |
| Carats |
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1,379,825 |
| Average Discount |
-26.19% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
A large percentage of our fine jewelry business is special orders. It’s one of our best-kept secrets. We do an awfully lot of custom wedding sets for couples because our club model provides for deep values of 40% to 50% for one-of-a-kind pieces.
Joel Heiligenthal | Sam’s Club
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INDUSTRY
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Sightholders Reject Most Goods at De Beers July Sight
The De Beers July sight closed with an estimated value of $200 million, with rough goods left on the table estimated to have exceeded 65% of the initial sight value. This sale represented the lowest amount for De Beers "sight No. 6" going back at least to the financial crisis of 2009, according to Rapaport News estimates, and sightholder sentiment similarly reached a nadir not seen since that time.
Manufacturers stated that polishing goods at current rough and polished prices is unprofitable, with several telling Rapaport News that the added value associated with sightholder status no longer justified the level of losses they were incurring on De Beers boxes.
One sightholder said that prices for these boxes, along with rough diamonds sold under long-term contracts at other majors, are out of touch with reality as rough prices
at small and medium-size mining companies were between 15% and 20% cheaper.
De Beers allowed sightholders to defer an extra 25% of total allocation in July. Sightholders are traditionally allowed to defer one box per rough category within a six-month period. As a result, the exact amount of goods refused, as opposed to those deferred to a later sight, was unclear.
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ALROSA's Rough Diamond Sales Drop
ALROSA's sales of rough diamonds plummeted 22.2% year on year to $2.1 billion in the first half of 2015 as the amount of goods sold fell 14.7% to 18 million carats. ALROSA noted a continued slowdown in the diamond market during the second quarter as its rough prices declined by 3%, but prices were down 6% year on year for the first half. During the second quarter, ALROSA sold 5.4 million carats of gem-quality diamonds at an average price of $176 per carat and 3.4 million carats of industrial diamonds at an average price of $11 per carat. Production during the second quarter jumped 20% to 9.6 million carats, contributing to a first-half increase of 13% to 18 million carats.
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World Bank Sees Commodity Price Decline
Prices for all major commodities will likely fall in 2015, according to the World Bank's Commodity Markets Outlook report. The bank projected that prices for precious metals, specifically gold, silver and platinum, will decline 9% in 2015 due primarily to reduced investment demand.
The bank anticipates that gold prices will plummet 12% this year, largely driven by expectations of a tightening U.S. monetary policy. Gold demand is considered an important indicator for forecasting diamond jewelry sales, since the metal is typically used in designs.
Physical demand for gold improved during the second quarter, with strong demand from India, one of the world’s two leading gold consuming markets. Demand in China, the world’s other leading market for gold, remained weak as investors chose to place their money into equities amid a surging stock market during the quarter.
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Surat Diamond Bourse on Hold
Plans to develop a Surat Diamond Bourse (SDB) have been put on hold amid weak diamond market conditions. An SDB spokesperson told the Times of India that many diamantaires who initially expressed interest in leasing space at the new bourse have lost money due to several industry defaults in recent months.
In its current design, the SDB is comprised of 10 buildings, representing 9.1 million square feet of office space. The SDB is envisioned as the centerpiece of the larger Diamond Research and Mercantile (DREAM) City project, sponsored by Gujarat. The project is intended to spur economic development in and around the village of Khajod in the Surat district.
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RETAIL & WHOLESALE
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Michael Hill's FY Sales +3% to $366M
Michael Hill International reported that sales rose 3.4% year on year to $366 million (AUD 495.6 million) for the year that ended on June 30. Same-store sales improved only 0.7%.
In Australia, the jeweler's largest market, sales fell 1.4% to $217 million (AUD 294.4 million), while comparable-store sales slipped 2.5%. Jewelry sales across New Zealand rose 3.9% to $74 million (NZD 114 million) and same-store sales jumped 4.3 %. In Canada, sales surged 14.6% to $61 million (CAD 79.1 million) and same-store sales rose 2.5%. In the U.S., the company's smallest jewelry market, revenue rose 13% to $11.3 million, but comparable-store sales increased just 3.5%.
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Xcel Agrees to Acquire C. Wonder
Xcel Brands Inc. agreed to acquire the C. Wonder brand, including trademarks, designs and intellectual property rights. Xcel is a brand development and media company that owns Judith Ripka, Issac Mizrahi, H by Halston and H Halston brands, and also designs and manages the Liz Claiborne New York brand. The financial details of the agreement were not disclosed and the acquisition is subject to board approval and customary closing conditions. C. Wonder, founded by J. Christopher Burch in 2011, offered jewelry, women's clothing, footwear, housewares and home décor. It filed Chapter 11 in January.
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Amfitheatrof Updates Three Tiffany & Co. Collections
Tiffany & Co.'s design director, Francesca Amfitheatrof, reinterpreted three signature collections for fall 2015: Tiffany Victoria, Tiffany Bow and Tiffany Infinity. The designer's intent was to bring out the strengths of each collection, while sculpting them in metals of harmonious colors and highlighting the pieces with diamonds.
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Retailers Target Facebook Marketing
Social media, particularly Facebook, has grown more important to U.S. retailers for engaging with and attracting new customers, according to the “State of Retailing Online 2015” survey conducted by Shop.org, Forrester Research Inc. and Bizrate Insights. Overall, 63% of retailers surveyed increased their online merchandising budgets this year compared with 2014, while 49% increased their online merchandising staff.
A quarter of retailers cited Facebook as their top acquisition platform, while half confirmed they will spend more on paid Facebook options this year to promote posts and advertise products. YouTube was in second place, with 29% of retailers expecting to spend more on paid options through video, followed by Pinterest (27%), Twitter (22%), Instagram (20%) and Snapchat (6%).
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Tytin Founder Receives Carelle-WJA Grant
The Women's Jewelry Association (WJA) Foundation awarded its annual $5,000 Carelle-WJA Grant to Tina Chan of Tytin Jewelry in Chicago. Chan anticipates using the funds to transform her newly opened store into a leading force supporting Chicago's jewelry designers.
In 2012, Chan founded Tytin Jewelry, a brand dedicated to “jewelry for the wearer who doesn't want to feel burdened by gaudiness or trend-saturated designs, but instead wants to make a subtle and unique statement,” she said.
The Carelle-WJA grant was created in memory of Brooke Tivol McGrath and intended to aid in establishing a designer's business. Eligible candidates must be current members of the Women's Jewelry Association and in their first five years of business.
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NRF Lowers Retail Growth Projections
The National Retail Federation (NRF) lowered the outlook for U.S. retail sales from an earlier forecast growth of 4.1% to 3.5%, citing unexpectedly slow growth during the first half of the year. NRF calculated that retail sales grew 2.9% during the first half and that the second half could reflect growth of 3.7%.
Jack Kleinhenz, the NRF's chief economist, opined that “household spending patterns appear to have shifted purchases toward services and away from goods, though this may be transitory. Additionally, a deflationary retail environment has been especially challenging for retailers’ bottom lines.”
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GENERAL
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Houston Heist Nets $1M in Goods From Dealer
An Israeli diamond dealer was robbed of an estimated $1 million of merchandise this past week in Houston, multiple sources confirmed. Houston TV station KPRC 2 reported that the gang followed the dealer to the airport, proceeded to rear-end his vehicle as a distraction at a stop light and when the dealer exited the driver's side, a member of the gang accessed the vehicle from the other side to steal the case of goods. The dealer was not injured.
A diamond industry source with ties to security providers noted that almost a dozen significant diamond and jewelry robberies have occurred in the Houston area this year. The FBI lists Houston, along with Los Angeles, Miami and New York, as one of the most popular U.S. cities for criminals fencing stolen jewelry, with some jewelers willing to buy that merchandise at heavily discounted prices and then re-sell them to legitimate buyers for a sizable profit.
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NY Jeweler Aranbayev Killed in Hit-And-Run
The co-owner of high-end jewelry store Rafaello & Co., Aron Aranbayev, was killed Sunday in what appears to have been intentional hit-and-run incident following an argument. The 40-year-old jeweler was known for providing goods to hip-hop celebrities including Jay-Z, Drake and Busta Rhymes from his store located in Manhattan's Diamond District.
Police said that Aranbayev was being dropped off near his home in Forest Hills, Queens. He exited the vehicle street-side and became involved in a verbal dispute with the driver of another car, described as a dark-colored Dodge Magnum. That driver reversed the vehicle initially but then lurched the car forward, striking Aranbayev, and then sped away.
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Synthetic Detector to Debut at HK Show
Diamond Services developed a new mini Raman spectrometer that it claimed would detect synthetic and color-treated diamonds and gemstones that are falsely presented as natural. The device will be unveiled at the Hong Kong Jewellery & Gem Fair in September. The company stated that this desktop-size device will provide individual diamond and jewelry companies the same technology used only by gemology labs
and it is able to accurately detect high-pressure-high-temperature (HPHT) and chemical vapor deposition (CVD) techniques.
The spectrometer is now undergoing final testing, with 40 units ordered on spec, according to the firm.
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RJC Responds to Provenance Provision
In response to an email from Rapaport News requesting comment on an article
that explores whether a sufficient audit trail could be implemented to support a chain of custody for diamonds, the Responsible Jewellery Council (RJC) said that the provenance claims provision in its 2013 code of practices should satisfy a diamond company’s need to trace its diamonds across the distribution chain.
The 2013 change introduced a new provision on provenance that enables members making such claims to have them audited as part of their RJC code of practices certification, though the code does not require members to make provenance claims.
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GIA Career Fair to Include 50 Industry Firms
Nearly 50 diamond and jewelry firms, including Tiffany & Co., CIRCA and Cartier, have registered for the Gemological Institute of America's (GIA) career fair to be held on July 27 at the Javits Center in New York City. GIA reported that hundreds of openings exist across the supply chain – from design and retail positions to manufacturing and management roles.
GIA’s New York Jewelry Career Fair is free and open to the public beginning at 8 a.m. and recruiters will be available from 10:15 a.m. to closing time 1 p.m. The opening panel discussion on “Job Success in Today’s Market” will be moderated by GIA's president and CEO, Susan Jacques, and feature Jeremy Dunn of The Rephinery, Rhonda Edelman of Tiffany & Co., Myriam Gumuchian of Gumuchian, Michael O’Connor of Style & Substance Inc. and Lee Siegelson of SIEGELSON.
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JA to Host Seminars July 26, 27
Jewelers of America (JA) will present professional seminars on July 26 and 27 during the JA New York summer show at Javits Center that are designed to help retailers focus their strategic marketing on millennials, learn about the ethics of lab-grown diamonds versus naturally mined stones, improve their business profitability and discover the latest jewelry fashion trends.
The program will include “Breakfast with Ben,” a keynote presentation on “understanding the millennial consumer” by Ben Smithee, the chief strategy officer at RELEVENTS, on July 27 from 10 a.m. to 11:30 a.m. JA and JA New York will host the invitation-only “Wear One Cocktail Party” on July 26 from 6 p.m. to 8 p.m. to celebrate jewelry and the inspiration behind showpiece collections. Participating designers will include Drukker Designs, Laurence Bruyninckx, Leo Ingwer, Lika Behar, Takat and Zaiken.
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Gem-A's CEO Riley Resigns
James Riley, the CEO of the Gemological Association of Great Britain (Gem-A) since April 2012, resigned following months of contention between members and the organization's board of directors.
Riley has been on leave since March, according to Professional Jeweller, which first reported his resignation. In conversations with Rapaport News, members credited Riley with drastically reducing the organization's operating deficit.
Riley's resignation comes ahead of Gem-A's annual general meeting, which was originally scheduled for June 24 but postponed by the board without explanation.
Gem-A is a registered U.K. charity that promotes the study of gemology through training and it maintains libraries and collections of gem materials.
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MINING
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Namibia to Introduce Independent Rough Sales
Namibia will soon start rough diamond sales, independent of De Beers, now that the two parties agreed to a new 10-year supply deal.
Under the yet-to-be-signed agreement, the government will be entitled to 15% of run-of-mine production recovered by Namdeb Holdings, the diamond-mining joint venture between Namibia and De Beers. Further details of how the government will conduct its sales were not disclosed.
The pact will also allow De Beers to increase the volume of goods it makes available to Namibia-based manufacturers. De Beers currently supplies rough diamonds to 11 sightholders that operate in Namibia.
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Diamcor Generates Sales of $455K
Diamcor Mining Inc. held one rough diamond tender during its first fiscal quarter that ended on June 30, resulting in the sale of 2,856.24 carats for $455,228, yielding an average price of $159.38 per carat. Approximately 2,050 carats of rough diamonds were recovered from the company's Krone-Endora at Venetia project in South Africa during the quarter and are being prepared for sale.
The company's main focus in the current quarter is to increase processing volume and advance its objectives in accordance with the recommendations of the updated National Instrument 43-101 technical report filed by the company on April 28.
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Peregrine Begins Summer Program at Chidliak
Peregrine Diamonds Ltd.'s independent review by Mineral Services Canada Inc. highlighted the presence of a 1-million-tonne resource expansion opportunity for Chdliak's CH-6 kimberlite. Any resource expansion at CH-6 is contingent upon additional exploration and evaluation work, which is underway as part of the summer drill program, according to the company. Peregrine budgeted approximately $3.75 million for the summer 2015 program, which includes four key targets.
In other company news, Gordon Keep resigned from Peregrine's board, leaving six members: Eric Friedland, Peregrine's executive chairman, and non-executive directors Robert Boyd, Alan Carter, Richard Cohen, Myron Goldstein and Peter Meredith.
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Villagers Say Diamond Miners Destroyed Environment
Mutare's Environmental Management Agency (EMA) is under fire from Marange villagers who accused the state watchdog of allowing diamond miners to destroy the environment, according to New Zimbabwe. At Manicaland Provincial Alternative Indaba 2015, convened by Zimbabwe Environmental Lawyers Association (ZELA), angry villagers blasted EMA for continuously fining companies in Marange rather than closing them for committing environmental offenses. EMA was also accused of profiteering from residents’ suffering because it was not taking action against environmental sabotage. Nonetheless, EMA stated it was working nonstop to address issues affecting villagers.
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STATS
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India
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June $Mil. |
%Chg. |
YTD $Mil. |
%Chg. |
| Polished exports |
$1,854 |
2% |
$11,072 |
9% |
| Polished imports |
$234 |
-64% |
$1,957 |
-42% |
| Net exports |
$1,614 |
100% |
$9,115 |
35% |
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| Rough imports |
$1,509 |
-11% |
$7,628 |
-18% |
| Rough exports |
$103 |
-1% |
$684 |
-12% |
| Net imports |
$1,407 |
-5% |
$6,944 |
-18% |
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| Net diamond account |
$207 |
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$2,171 |
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ECONWATCH
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Diamond Industry Stock Report
Industry stocks were mixed this week, with Birks Group (-10%) down in the U.S., Damiani (+7%) led gains in Europe and Chow Tai Fook (<-2%) slightly lower in the Far East.
Rajesh Exports (+16%) led gains in India. Mining stocks were generally lower, led by Stornoway (-13%), and Anglo American (-7%) dropped ahead of Friday's results. View the detailed industry stock report.
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Price |
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Chg |
| Currencies |
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| $1 = Euro |
0.915 |
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-1% |
| $1 = Rupee |
63.58 |
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-0.30% |
| $1 = Hong Kong $ |
7.75 |
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<0.1% |
| $1 = Israel Shekel |
3.82 |
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-0.60% |
| $1 = Rand |
12.41 |
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-0.30% |
| $1 = Canadian Dollar |
1.30 |
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-0.10% |
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| Precious Metals |
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| Gold |
$1,094.24 |
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-3.50% |
| Platinum |
$1,979.30 |
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-1.30% |
| Silver |
$14.81 |
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-0.30% |
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| Stock Indexes |
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| BSE |
28,504.93 |
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0.60% |
| Dow Jones |
17,851.04 |
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-1.10% |
| FTSE |
6,667.34 |
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-1.80% |
| Hang Seng |
25,282.62 |
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0.90% |
| S&P 500 |
2,114.15 |
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0.30% |
| Yahoo! Jewelry |
988.4 |
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<0.1% |
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INDIA MARKET REPORT
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Polished Trading Activity
Trading demand and activity remains slow and the local market sentiment is cautious. Manufacturing activities continue to decline after the De Beers sight and liquidity remains tight. Read the polished diamond trading report.
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