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Industry
Trade Report
By Avi Krawitz
U.S. and Chinese markets inspire some hope that growth will return in 2014.
Diamond dealers were confident that the U.S. Christmas shopping season would spur steady trading at year-end despite the fact that activity in November fell below previous years. Diamond manufacturers and dealers in India were largely absent from the market because the annual two-to three-week Diwali holiday began on November 3. Many small to medium-size manufacturers took extended vacations, happy to avoid the high rough prices, tight liquidity and slow domestic demand that have hindered their operations in 2013. Some of those conditions eased during the Diwali break, though not all. Reports from the local retail sector indicated that jewelry sales fell below expectations during the period, largely due to government constraints on the gold sector. However, the industry was encouraged by improvements in the rough diamond market during the break after De Beers lowered prices by 3 percent to 5 percent at the November sight.
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The stream of new polished coming to market was moderately slow, although suppliers still held relatively high inventory levels — especially given the time of year. While Indian dealers were on their Diwali vacations, polished buyers focused on other centers and the attention of the industry turned to Antwerp, Ramat Gan and New York to source goods for the season. Trading in those centers was steady even if it failed to inspire a significant boost in activity. Trading at the Israel Diamond Week that took place at the Diamond Dealers Club in New York from November 11 to November 14 was okay but still below expectations despite the large crowd that attended the event. As a result, polished prices were basically stable during the month. The RapNet Diamond Index (RAPI) for 1-carat certified diamonds was flat during the period November 1 to November 25. RAPI for .30-carat diamonds rose 1.3 percent, while RAPI for .50-carat diamonds rose by .5 percent. RAPI for 3-carat diamonds increased by .2 percent. Trading remains extremely price point sensitive, as it has been for much of 2013, and buyers are quite selective in the goods they are looking for, with good demand for commercial qualities. There is good demand for .30-carat to .50-carat, G to J, VS to SI diamonds, driven by growing Far East and steady U.S. demand for these goods. Overall, the U.S. continues to be the strongest market for polished, as one might expect at this time of year. Far East demand has improved although jewelry retailers were delaying their larger retail purchases until they have to start preparing for the Chinese New Year holiday, which begins on January 1.
Jewelers such as Chow Tai Fook, Chow Sang Sang and Luk Fook Holdings continue to report that their growth is being driven by gold jewelry products and supplemented by decent demand for gem-set jewelry. Such sentiment was supported by the World Gold Council (WGC) as it ranked China the largest single jewelry market “by some margin” in the council’s third-quarter “Gold Demand Trends” report. By volume, global gold jewelry demand rose 5 percent year on year to 486.7 tons during the third quarter, while the value of demand fell 15 percent to $20.75 billion (see Gold Jewelry Demand chart). China accounted for 34 percent of the market during the quarter, up from 27 percent in the second quarter, followed by India, which saw its share of global demand shrink from 33 percent to 22 percent. The U.S. accounted for 7 percent of the market, followed by Turkey with 5 percent, Russia with 4 percent and Saudi Arabia with 3 percent. WGC reported that consumer demand for gold jewelry, bars and coins reached record levels during 2013, and listed three factors that influenced the increase: an approximately 26 percent decline in gold prices since the beginning of the year (see Gold Price Trends in 2013 chart), which has made gold more affordable to consumers; improving U.S. economic conditions and its implications for the global economy, and strong brand promotion in the jewelry sector. The report noted that consumers across the globe have shown a rising preference for higher-karat items, signaling that investment considerations are increasingly complementing the emotional and aesthetic appeal of gold jewelry. The fact that jewelry retailers are stocking more investment products — small bars and coins — provided further evidence of the investment appeal in gold jewelry, WGC added.
Diamantaires are hoping the same preference for higher-ticket items will evolve in gem-set jewelry but the trade remains focused on commercial goods against the backdrop of a cautious market environment. Investment demand for diamonds centers on the high-end, special items, such as those that captured attention at the recent round of jewelry auctions at Sotheby’s and Christie’s in Geneva (see report in Auctions section). Dealers have noted some spillover to the rest of the market as colored diamonds and fine-cut fancy shape goods have maintained a positive momentum throughout the year. Come the Christmas season, consumer demand may well reflect the trends witnessed in the dealer market recently. Diamantaires expect that consumers will be price-sensitive and selective this holiday, while looking for something unique and special. Such is the focus of the trade as it enters the final month of the year, gaining confidence that the season will provide a solid foundation to spur better growth in 2014.Article from the Rapaport Magazine - December 2013. To subscribe click here.
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