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Market Comments 11/26/2014
Nov 26, 2014 6:00 PM
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Inventory increasing, liquidity decreasing with tough rough pricing. Polished prices under pressure after relatively weak Indian Diwali and China Golden Week. All eyes and hopes are on the U.S. retail market. Chow Tai Fook 1H revenue -22% to $2.9B, profit -23% to $353M. Luk Fook 1H revenue -25% to $973M, profit -16% to $104M. Signet 3Q same store sales +4%, loss of $1.3M vs. profit of $34M. Tiffany 3Q revenue +5% to $960M, profit -60% to $38M. Sotheby’s NY sells pear, 9.75ct., fancy vivid blue, VVS2 diamond for record $32.6M ($3.3M/ct.). India’s Oct. polished exports -15% to $2.2B. The Rapaport Group wishes all our friends a happy Thanksgiving and a successful holiday season.
Fancies: Fancy shape market improving as manufacturers gain favorable margins over rounds. Princess cuts waking up following long slow period. Large fancies in demand. Healthy U.S. demand maintaining price levels for commercial qualities. Curves (Pears, Ovals) doing better than Squares (Emerald, Princess) in larger sizes with Squares doing better in under the carat sizes. Far East becoming more aware of fancy shapes but demand still limited. Buyers selective regarding shape- and cut-quality with significant price differentials between excellent- and average-cut fancies. Off-make, poorly-cut fancies illiquid and hard to sell even at very deep discounts.
Global Comments
United States: Diamond trading in New York is slow. Buyers are pushing for higher discounts as suppliers are under pressure to raise liquidity levels. Dealers are waiting for clearer price signals from the market before they buy. There is steady demand for 2-carat to 3-carat, H-J, SI-I2 diamonds. There is more of a focus on finished jewelry pieces than loose diamonds ahead of this week’s Thanksgiving weekend, which signals the start of the Christmas shopping season. Expectations for the season are mixed as recent government data suggested that jewelry buying is cautious but consumer confidence is improving.
Belgium: Polished trading has slowed slightly. Manufacturers are facing tight liquidity and prices have softened as they try to generate cash flow. There is opportunity for buyers to find good deals, especially for cash, and some dealers are taking advantage of the lower prices to build up inventory. There is good demand for round, 0.50-carat to 0.90-carat, G-J, VS-SI diamonds, and improving demand for princess cuts for the U.S. market. Rough trading is slow and demand is expected to be subdued until the end of the year.
Hong Kong: Activity remains slower than usual for this time of the year. Business sentiment continues to be affected by the Occupy Central protests that have taken place in the city over the past two months. Jewelry retailers note that sales have declined significantly as fewer visitors are coming to the city because of the protests. Diamond trading is equally cautious and there are a lot of goods available on the market. Some suppliers are participating in this week’s Hong Kong International Jewellery Manufacturers Association show, hoping for some exposure to consumers at this B2C event.
India: Polished suppliers are cautious as Far East demand has slowed, while the U.S. is stable. There is steady demand for 0.50-carat to 0.99-carat, G-J, SI-I2 diamonds, while demand for 0.30-carat to 0.40-carat goods has softened. Manufacturers have large inventories and continue to be pressured by tight liquidity, while buyers are prepared to wait for some market stability before buying. Manufacturers are maintaining steady output at their factories as they want to retain skilled workers and as they anticipated that conditions will improve in the first quarter. Therefore, rough trading is quiet but steady. Retail demand is stable during the ongoing wedding season.
Israel: The market is quiet with few foreign buyers in Ramat Gan this week looking for goods. The focus is clearly on the U.S. ahead of the holiday season, while Hong Kong and China remain quiet. There is good demand for 0.50-carat to 0.70-carat, H-J, SI-I1 diamonds and continued weak demand for high-end, VVS-and-better clarity stones. There is improving demand for fancy color and fancy shape diamonds as dealers seek ways to improve their margins.
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