With the Christmas season
approaching, most diamantaires are confronted with the usual question: Is the
end of the year going to offset the rest of the year’s losses for some and
bring in additional profit for others?
There seems to be
agreement that September was a turning point for 2017. Until then, buyers were
paying exorbitant prices for rough, but things have apparently calmed down
since, reducing the heat on prices by some 10%. This trend change on the rough
side may be due in part to wiser use of scarce financial resources — credit is
rarer now, and diamantaires are therefore spending it more cautiously — and in
part to the relative softness of demand on the polished side.
Categories count
“Throughout 2017, there
has been constant pressure on the polished prices,” said Bharat Shah of
manufacturer and supplier Diampex. “There were more sellers than buyers, which
inevitably caused profit margins to shrink.” As such, he continued, when many
Indian companies closed their books for the year on the Diwali festival,
“globally, more than 50% of manufacturers were not satisfied with their yearly
results.”
Fortunately, things have
been changing for the better lately, at least in some diamond categories, said
Ketan Shah of manufacturer Kediam. “The market is stable and firm in polished
prices, but in some categories, there are shortages of goods. We’re currently
noticing a peak in demand, in particular for VS to SI, D to I, in the
2-caraters-and-up range. More and more orders for such stones have been
starting to come in since September, and we’re seeing the trend increase as
time goes by — to such an extent that it’s becoming increasingly difficult just
to find the requested stones.”
Bullish trends
Specific segments are not
the only aspects of the trade showing an improvement, noted Bahrat Shah. “The
3% appreciation of the rupee against the US dollar — from 67 to 64 per dollar —
didn’t have much impact globally on the trade between India and the rest of the
world. This is a positive sign of trade steadiness in terms of exchange risk, a
feature that will contribute to supporting a good season that we can expect to
last at least until February 2018.”
Confirming the bullish
trend, Chaim Pluczenik of Pluczenik Diamonds said China was coming back as a
major consumer market and that orders were coming in from all over the world.
“Due to the lack of rough, we can feel that prices of polished are firm, and we
can already see increases in price of about 3% to 4% in the 30- and
50-pointers, as well as in the 4-grainer [1-carat] range across the board,” he
added.
Profit still tight
Polished sales may look
good, but margins are not following suit. “Demand is there, but is still not
strong enough to really push prices up,” stated Hasmukh Ramani of wholesaler
and manufacturer KGK Diamonds B.V.B.A. “Personally I think that globally for
the trade, this Christmas will be a little weaker than that of last year,
especially when you take into account the whole picture: production, sales and
profit.”
How late people tend to be
with their payments on average can also be informative. The good news is that,
according to Ramani, this isn’t much of a problem in the polished trade. “The
rough business is another story,” he said. “Cash liquidity is an issue, and I
wouldn’t be surprised if its real effects were only felt over the coming four
to five months, especially with the current average two-month overdue in that
market segment.”
Some companies will be
more successful than others, depending on their market segment and product
category, Bharat Shah said. “Polished-wise, traders will do well this year.
Manufacturers, on the other hand, will not necessarily be happy. And those who
will suffer most will be the small and medium enterprises. In terms of rough,
traders with direct access to primary sources will definitely do better.”
Article from the Rapaport Magazine - December 2017. To subscribe click here.