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Rapaport TradeWire January 28, 2016
Jan 28, 2016 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
January 28, 2016
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Diamond manufacturers increasing production as
profitability returns due to lower rough prices and firm polished prices due to
shortages. De Beers 2016 first sight period rough sales +118% to $540 from
$248M at Dec. sight period. Reduction in De Beers rough prices estimated at 7-10%.
Polished demand cautious as China prepares for Lunar New Year (Feb. 8). Good
demand for 1ct. RapSpec A2 (3X, none) with large 6-8% premiums for 3X over 3VG.
De Beers 2015 production -12% to 28.7M cts., sales volume -40% to 20.6M cts.
ALROSA 2015 production +6% to 38.3M cts., sales -30% to $3.4B and sales volume
-25% to 30M cts. Petra 1H production +2% to 1.6M cts., sales -28% to $154M.
Swiss watch 2015 exports -3% to $21.2B as Apple boasts record watch sales in
holiday quarter.
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| Diamonds |
1,067,032 |
| Value |
$7,937,845,462 |
| Carats |
1,226,337 |
| Average Discount |
-27.96% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI) is the average price for the top 25 diamond qualities (D-H, IF-VS2). It is based on the 10 best priced diamonds for each quality. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
We left prices unchanged because we see no reasons right now for them to fall, especially given they even rose slightly at the end of last year.
Andrey Zharkov, president of ALROSA, speaking to Interfax about keeping rough prices static at its January contract sale
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MARKETS
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United States: Diamond manufacturers increasing production as
profitability returns due to lower rough prices and firm polished prices due to
shortages. De Beers 2016 first sight period rough sales +118% to $540 from
$248M at Dec. sight period...
Belgium: Sentiment improving as
more orders are coming in. U.S. demand sustaining the market. Steady sales to
smaller markets such as Turkey and Scandinavia. Buyers face competition for
select supply as availability is scarce...
Hong Kong: Wholesale trading
improving with firm prices due to shortages. Jewelers are buying to
replenish stock sold during the holiday season with some buying for inventory...
India: Mixed sentiment in Mumbai
as rupee depreciation (-3% in Jan. to 68/$1) weighs on domestic demand. Dealers
more active than before and suppliers getting better prices due to shortages...
Israel: Rising optimism as
trading continues to improve. Steady U.S. orders compensating for weak Chinese
demand. Wholesalers slowly increasing inventory levels as they expect prices to
firm in the coming weeks due to continued shortages...
Click here to continue reading
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RAPAPORT STATEMENT
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The Right Way Forward
De Beers is moving forward in the right direction by reducing rough prices sufficiently to enable increased sales of rough diamonds and a resumption of diamond manufacturing activity. This is evidenced by an increase in De Beers rough diamond sales by 118% from $248 million in the tenth sales cycle of 2015 to $540 million in the first cycle of 2016....
Click here to read the full statement
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INDUSTRY
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De Beers January Revenue Jumps to $540M
De Beers sold $540 million worth of rough diamonds in
January signaling a significant rise in demand from December. The company
published the monthly sales results for the first time, adding that its
December sales amounted to $248 million.
The revenue figure includes sales to sightholders, its auction clients and
internal sales to De Beers government and local partners. The company explained
that demand for rough broadened across the entire product range as cutting and
polishing factories began to ramp up activity.
Sightholders said De Beers reduced prices by more than 5% on average.
The company has reverted to its default deferral policy allowing sightholders
to defer one box every six months after offering more flexibility in the second
half of last year, but has kept a 20% buybacks policy introduced during
that period.
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De Beers 2015 Sales Volume -40%
De Beers rough diamond sales
slumped 40% to 20.6 million carats in 2015 as market weakness and lower diamond
manufacturing levels took their toll.
The
decline in sales volume coincides with a 12% drop in production to 28.7 million
carats over the previous year as the miner reduced rough output in response to
trading conditions, parent Anglo American said. The result is just shy of
production guidance of about 29 million carats.
The
overall reduction is mainly due to reduced output from Debswana, De Beers
partner in Botswana, where production dropped 16% to 20.4 million carats.
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ALROSA Keeps Prices Stable
ALROSA kept prices steady at
its January contract sale stressing it sees no reason for prices to fall in
current market conditions.
“We left
prices unchanged because we see no reasons right now for them to fall,
especially given they even rose slightly at the end of last year,” Andrey
Zharkov, president of the Russia-based miner, was quoted as saying by the
Russian news service Interfax.
Demand
for rough in January was better than expected while supply levels did not
increase, sources close to ALROSA explained to Rapaport News. The miner once again allowed buyers to defer up
to 70 percent of goods at the sale as it did at the previous sale in December.
Clients said all goods were sold at the sale.
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Six More Arrested in GIA Hacking Case
Six more people have been
arrested in relation to the hacking of Gemological Institute of America (GIA)
diamond-grading reports by outside
parties as the investigation into the case continues. A total of eight arrests
have now been made.
The GIA has extended its submission date for the
confirmation service for members of the trade concerned about the validity of
their grading reports by two months to March 31, 2016. Holders of a GIA report originally
issued between November 2014 and October 2015 who are concerned about its
validity may submit the original report and the referenced diamond to any GIA
location at no charge by the new deadline. To date only 297 of 1,042
invalidated reports have been returned.
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Swiss Watch Exports -4% in December
Swiss watch exports declined 3.8 percent year on year to
$1.71 billion (CHF 1.74 billion) in December as shipments to Hong Kong, the
nation’s largest trade partner for the industry, continued to fall.
Exports to Hong Kong slumped 21 percent to $244 million, while shipments to the
U.S. fell 5.5 percent to $158.9 million, according to the Federation of the
Swiss Watch Industry.
Wristwatch exports decreased 3.1 percent to $1.63 billion
compared with a year ago, while shipments of other timepieces slumped 17
percent to $82.4 million.
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Synthetics Firm Lures High-Profile Cutters
Diamond Foundry, a
synthetic-diamond company with financial backing from actor Leonardo DiCaprio and Silicon
Valley entrepreneurs from Princeton and M.I.T, has
made two high-profile appointments, including the inventor of the princess cut.
Israel Itzkowitz, who invented the now-popular
diamond style in 1979, has joined the company as Master Cutter. Over the years,
he has crafted designs for De Beers, Tiffany & Co. and Graff Diamonds.
Maarten de Witte, a master diamond cutter and
“brand builder,” formerly known as the ‘Diamond Wizard’ at Hearts On Fire, has
also joined the company.
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IIa Denies Infringement of Element Six Patents
Lab-grown diamond producer IIa
Technologies denied it infringed on patents owned by De Beers synthetics
company Element Six and vowed to “challenge the validity” of the patents.
“We believe we are not in any way infringing on
Element Six’s claims,” Vishal Mehta, IIa’s chief executive officer, said in a
statement. “In addition, we will challenge the validity of their patents. IIa
Technologies has entered its appearance in the High Court in Singapore and will
vigorously defend itself.”
IIa was “exploiting Element Six patents for
commercial gain,” potentially in both the industrial and jewelry sectors, the
De Beers subsidiary alleged earlier this month.
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World Diamond Congress to Focus on Transparency
The World Federation of
Diamond Bourses (WFDB) will hold its 37th World Diamond Congress in Dubai from
May 16 to 19, placing transparency, responsibility and sustainability at the
heart of the summit’s agenda.
The meeting, a biennial gathering of the WFDB
and the International Diamond Manufacturers Association (IDMA), will be
attended by the WFDB’s 30 presidents and more than 200 industry representatives. The WFDB also aims to use the
forum to galvanize support for generic marketing of diamonds through its World
Diamond Mark initiative and create stronger links with the Diamond Producers
Association.
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RETAIL & WHOLESALE
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Tiffany Announces $500M Stock-Buyback Program
Tiffany & Co.’s board of
directors has approved a new stock buyback program under which the jewelry
retailer can repurchase up to $500 million of the company’s common stock.
Tiffanys’ announcement comes after it unveiled a 6% drop in total sales in the two months to December 31, with performance hit by a
strong U.S. dollar and lower levels of tourist spending. The company’s share
price slid 7.3% during the week to January 21.
The new repurchase program replaces the
company’s existing stock repurchase program announced in March 2014.
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PC Jeweller's 3Q Revenue, Profit Soar
India-based PC Jeweller
reported revenue on a standalone basis jumped 20% year on year to $320.3
million (INR 21.8 billion) in the third quarter that ended December 31 mainly
because of surging domestic sales. Net profit for the quarter soared 34% to $21.5 million.
Revenue
from within India grew 22% to $233 million compared with a year ago,
while exports advanced 13% to $87.4 million, the online jewelry
company said.
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MINING
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Petra Diamonds 1H Sales -28%
Petra Diamonds reported revenue slumped 28
percent year on year to $154 million in the first half that ended December 31. Excluding
exceptional precious stones, sales dived 18 percent to $144 million.
Production rose 2 percent from a year ago to 1.6
million carats, above the company’s target of 1.5 million carats. Petra remains
on track to reach its full-year output guidance of 3.3 to 3.4 million carats to
June 30, 2016, the company said.
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Lucapa Recovers Largest Lulo Diamond
Lucapa Diamond Company
recovered a 133.4-carat diamond from its Lulo Diamond Project in Angola, the
largest so far from the mine as it eclipsed a previous record of 131.4 carats
set in 2012. The diamond is “not of high quality,” the miner said.
The discovery comes after heavy rains restricted
access to the company’s planned mining areas during the fourth quarter to
December 31. Lucapa assigned earth-moving equipment to higher-lying areas of
interest to trial new mining blocks. One of these new areas was Mining Block 6.
In the first few days, Lucapa recovered diamonds weighing 133.4 carats, 29.2
carats, 12.37 carats and 11.1 carats.
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Murowa Mine Aims to Produce 1M Carats in 2016
Murowa Diamonds, a Zimbabwean
mining business exited by Rio Tinto last year, wants to expand production
fourfold this year, according to a Bloomberg report. The company will inject
$60 million into the mine over the next four years, the report added.
“Our plan is to produce more than a million
carats this year,” the news agency cited Lovemore Chimuka, a spokesman for the
company, as saying. Production was 250,000 carats in 2015, he said. Rio Tinto sold its 78-percent stake in Murowa
last June.
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Stellar Finds 55-Carat Diamond at Baoulé Mine
Stellar Diamonds recovered a 55-carat gem at its Baoulé
kimberlite pipe in Guinea, which the company claims as evidence that the mine
is a potential source of large diamonds.
The stone appears to have a ‘boart’ – or fragmented – exterior and a
potentially better-quality diamond on the interior, the West Africa-focused
diamond-development company said.
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BHP Billiton, Peregrine End Chidliak Royalty Deal
BHP Billiton Canada (BHPB) settled litigation
with Peregrine Diamonds and ended a royalty agreement with the diamond miner
related to the Chidliak project in Canada.
Under the royalty arrangement, Peregrine had
granted BHPB 2% of future mineral production, including diamonds, from the
Chidliak asset. A dispute between the companies arose in May 2015 in regard to
BHPB’s transfer of the royalty to South32, a company formed when BHPB demerged.
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GENERAL
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Cindy Edelstein Passes Away
The jewelry world is mourning
the passing of Cindy Edelstein, an entrepreneur, author, editor and long-time
consultant to the industry, who died January 24 at the age of 51. The cause was
heart failure, according to a post on Instoremag.com.
Edelstein began her career at JCK magazine and had a notable
careers as a trade-show consultant and creator and writer and in 1991 founded
the Jeweler's Resource Bureau with her husband, Frank Stankus, to highlight
jewelry designers and their work. She won numerous awards and was a
long-serving member of the board of the Women's Jewelry Association.
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GIA Opens Expanded Botswana Facility
The Gemological Institute of America (GIA) opened an
expanded laboratory and education facility in Gaborone, Botswana, January 19 to
support its beneficiation efforts in the African nation by bringing value-added
services to gem-producing countries. The expansion includes more classroom
space.
The GIA is advancing its goal of making Gaborone the destination for
industry-leading gemological education in Africa, it said.
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London Bourse Releases Guide to Preventing Investment Scams
The London Diamond Bourse
published consumer advice to prevent the public from becoming victims of
“boiler-room” scams claiming to sell highly lucrative investment diamonds.
The advice, available on the public area of the
London Diamond Bourse website, was developed by the gem exchange and the U.K.’s
Insolvency Service. Simon Rainer, a former chief executive officer of the
British Jewellers Association, was a consultant for the project.
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7th Antwerp Diamond Trade Fair to Start Jan. 31
The 7th Antwerp Diamond Trade Fair (ADTF) will
be held from January 31 to February 2 in the halls of the Antwerp Diamond
Bourses.
As part of the three-day event, an “Antwerp
Diamond Night” is scheduled for January 31. Two conferences will also be held:
“Who is afraid of lab-grown diamonds?” organized by the International
Gemological Institute, and another titled “What is luxury?”
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ECONWATCH
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Diamond Industry Stock Report
Anglo American (+24%) led mining shares this past week as subsidiary De Beers announced improved diamond sales. Signs of a recovery in the rough market also seem to have aided Stellar (+22%), Gem Diamonds (+20%), Petra (+14%), Mountain Province (+11%) and ALROSA (+8.1%). U.S. retailers were mainly stable or strengthened, led by J.C. Penney (+9.8%), after many had fallen the previous week. There were signs of improvement across Asia and Europe.
View the detailed industry stock report.
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Jan. 28 (12:45 GMT) |
Jan. 21 (11:45 GMT) |
Chng. |
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| $1 = Euro |
0.92 |
0.92 |
0.001 |
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| $1 = Rupee |
68.20 |
67.99 |
0.2 |
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| $1 = Israel Shekel |
3.96 |
3.97 |
-0.01 |
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| $1 = Rand |
16.30 |
16.69 |
-0.39 |
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| $1 = Canadian Dollar |
1.41 |
1.45 |
-0.04 |
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| Precious Metals |
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Chng. |
| Gold |
$1,119.68 |
$1,099.25 |
$20.43 |
1.9% |
| Platinum |
$881.23 |
$818.26 |
$62.97 |
7.7% |
| Silver |
$14.38 |
$14.03 |
$0.35 |
2.5% |
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| Stock Indexes |
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Chng. |
| BSE |
24,469.57 |
23,962.21 |
507.36 |
2.1% |
| Dow Jones |
15,944.46 |
15,766.74 |
177.72 |
1.1% |
| FTSE |
5,942.66 |
5,697.07 |
245.59 |
4.3% |
| Hang Seng |
19,195.83 |
18,542.15 |
653.68 |
3.5% |
| S&P 500 |
1,882.95 |
1,859.33 |
23.62 |
1.3% |
| Yahoo! Jewelry |
996.92 |
969.60 |
27.32 |
2.8% |
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INDIA MARKET REPORT
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Polished Trading Activity
Mixed sentiment in Mumbai
as rupee depreciation (-3% in Jan. to 68/$1) weighs on domestic demand. Dealers
more active than before and suppliers getting better prices due to shortages.
Good demand for 1ct., G-J, VS-SI diamonds. Melee in better qualities slightly
weak with suppliers still holding a lot of inventory. Manufacturers slowly
raising polished production to fill gap in supply. Rough demand improves at De
Beers and ALROSA sales with steady demand on the secondary market as small
manufacturers increase production.
Read the Polished Diamond Trading Report
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