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Market Comments 12/11/2014
Dec 11, 2014 6:00 PM
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Prime Minister Modi and President Putin open World Diamond Conference in New Delhi. ALROSA to raise rough supply to India as Mumbai gets special rough trading zone. Warning: Polished prices under severe pressure with sharp drop in trading as buyers demand lower prices. Some suppliers significantly lowering prices to raise cash as liquidity dries up. Markets unstable due to imbalance between rough and polished prices. De Beers rough price index +7% in 2014. Christie’s NY sale at $67M (75% by lot) with pear, 89.23ct., D, VVS1 selling for $11M ($124K/ct.). Sotheby’s NY sale at $44M (76% by lot) with 25.44ct., D, VVS1 selling for $3M ($117K/ct.). U.S. Oct. polished imports +1% to $2.2B.
Fancies: Warning - polished prices under severe pressure with sharp drop in trading as buyers demand lower prices. Some suppliers significantly lowering prices to raise cash as liquidity dries up. Markets unstable due to imbalance between rough and polished prices. Fancy shape market improving as cutters gain favorable margins over rounds. Pears and Ovals doing well. Princess and Marquise very weak. Large, top-shape fancies in better demand than rounds. U.S. demand maintaining price levels for commercial qualities. Far East fancy demand very weak. Buyers selective regarding shape- and cut-quality with significant price differentials between excellent- and average-cut fancies.
Global Comments
United States: Trading in New York is stable but quiet with overall demand low. Christmas season retails sales have been weak to date, although online retailers are a notable exception. Diamonds below 0.50 carats are moving slowly. There is healthy demand for 1-carat to 2-carat, G-I, SI1 diamonds and 5-carat to 8-carat D, IF stones. In fancy shapes, E-F colors doing well, while F-H is slow and demand for VVS-VS stones is less than for other clarities.
Belgium: There are mixed reports from the market with some suppliers getting late Christmas orders, particularly from Europe. Others maintain that trading is weaker than usual for this time of the year. Buying is focused on filling specific orders, as jewelers have avoided building up excess inventory for some time now. There are a lot of goods available on the dealer market as a result, particularly 0.30-carat to 0.49-carat diamonds, for which demand has slowed in recent months. A shift toward trading in uncertified stones below 0.50 carats in parcels has been observed. Demand for GIA dossiers in other sizes is steady and there is good European demand for 0.70-carat and 1-carat, G-K, VS-SI diamonds. In fancy shapes, 1-carat to 2-carat pears and ovals are moving well in all qualities, while demand for princess cuts remains weak.
Hong Kong: Polished diamond trading is quiet, reflecting a cautious market in Hong Kong and China ahead of the Chinese New Year season. Jewelers in Hong Kong have sufficient inventory to meet consumer demand, which has slowed dramatically in recent months. Luxury retailers expect a significant year-on-year drop in fourth quarter sales. As a result, dealer demand is sporadic and focused on specific items to fill existing orders. There remain concerns among suppliers that buyers in Mainland China may default on payments due to stringent enforcement of capital controls as part of the government’s anti-corruption campaign.
India: Trading has slowed in December and the lack of liquidity remains a deep concern among diamond manufacturers. In particular, small manufacturers are under pressure as profit margins are tight and there are reports of a number of small factories closing down. Overall, polished production is below capacity since there are already a lot of goods on the market. Dealers, wholesalers and retailers are focused at the moment on clearing existing stock. There is stable demand from the U.S. while the Far East remains slow. There are very few foreign buyers in Mumbai searching for goods. Buyers are cautious, despite the high discounts being offered and some expect prices to soften further. Rough trading was slow ahead of this week’s De Beers sight and ALROSA sale, with expectations for smaller sales than usual for December. Activity in the jewelry retail sector is stable, driven by bridal jewelry line sales during the ongoing wedding season.
Israel: The market is slow but stable with buyers mainly filling last minute orders from U.S. retailers for Christmas season shopping. Demand is healthy for triple EX goods, but weaker for all other diamonds. Trading of stones between 0.30 carats and 0.40 carats is stable and brisk for 0.50-carat to 0.80-carat goods. Demand for diamonds between 1-carat and 3-carat is stable, but soft above 3 carats. Overall, SI diamonds are moving well, especially in G-H colors. In fancy shapes, demand for ovals and pears exceed supply, especially in larger sizes. Trading in cushion and marquise cuts is quiet.
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