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Market Comments 7/30/2015
Jul 30, 2015 6:00 PM
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Rough sales and diamond manufacturing activity plummeting. Shortages holding up prices for large stones but some very good deals available. Sizes below one carat under severe pressure. “New York Jewelry Week” weak. Low expectations for upcoming India and HK shows as Chinese stock market bubble bursts. Rough prices unsustainable and likely to fall significantly. De Beers allows sightholders to defer 75% of their August purchases, 1H rough sales -21% to $2.7B, price index -8%, earnings -23% to $360M. Petra Diamonds FY revenue -10% to $425M. Letšeng 1H sales -28% to $106M, average price -18% to $2,264/ct. LVMH 1H watch & jewelry sales +23% to $1.7B, operating profit +91% to $227M.
Fancies: Demand soft. Pears, Ovals and Cushions steady, Princess, Hearts slow. Prices for curves improving slightly. U.S. demand supporting market for commercial-quality fancies, especially for sizes under the carat. 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: Market activity centered on the various jewelry shows that took place in New York this past week – including the Antique Jewelry and Watch Show, JA New York, the IWJG show and JCK Luxury Privé. Despite weekend visitor traffic, sales were weak and diamond trading in particular was cautious. There is steady demand for 1-carat to 3-carat, H-I, VS-SI, EX and VG cuts, and orders for pique-quality diamonds remain stable. Overall, the dealer market is still in vacation mode. Demand is order specific and jewelers have moderate expectations for the rest of the year, so are not yet making large inventory purchases for the Christmas season. Jewelry retail sales are stable compared to last year except for single-ticket items priced above $10,000, which are weak.
Belgium: Trading is slow as many dealers took an early vacation before the market winds down for a three-week break that begins Monday (August 3). Buyers are looking for heavily discounted bargains without finding suppliers willing to sell. There is steady demand for 1-carat to 1.25-carat, G-H, VS-SI, while demand is soft for larger sizes above 3 carats. Rough trading is slow with very few new goods on the secondary market following the small July De Beers sight and ALROSA sale. Rough boxes are selling at steep discounts. Dealers are waiting until after the vacation period -- and the August De Beers sight -- to gauge how the market will develop before committing to larger-scale purchases.
Hong Kong: Polished trading is slow but stable. Analysts note that tourist traffic for luxury purchases in Hong Kong continues to slow as high-spending visitors shift to other destinations – particularly those with depreciated currencies such as Japan and South Korea. Diamond dealers expect the quiet trading to continue at least until the September Hong Kong show.
India: The market is stable but sentiment remains weak due to the prolonged decline in global trading. Manufacturers continue to operate their factories at reduced capacity, particularly as rough trading has slowed dramatically in the past month. There’s very little new rough coming to the market and cutters are focused on selling existing polished supply as they try to reduce their large inventories. There is steady demand for 1-carat to 1.50-carat, G-J, VS-SI diamonds, while demand remains weak for 0.30-carat to 0.50-carat diamonds. A cautious local market has muted diamond suppliers’ expectations for next week’s India International Jewellery Show. Gold product suppliers are a bit more upbeat with some expecting the show to boost demand following the recent price decline for the metal.
Israel: The market is quiet. There is good demand but a shortage of fine-quality diamonds, while suppliers are holding large inventory of lower-quality diamonds which are difficult to sell. U.S. demand is steady for commercial-quality diamonds although many American customers have been on vacation the past few weeks. There’s stable European demand for high-end goods. In fancy shapes, there is good demand for pears and ovals and improving demand for cushions. Rough trading is quiet. Activity will probably slow further as dealers take August vacations and bourse service hours are reduced in the coming week.
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