Trade report

December was busy in the run-up to Christmas, before activity dropped off as the festival arrived and markets closed down. Overall, trading was positive, with suppliers rushing to fill retailers’ holiday orders.
   Growing US consumer confidence appeared to drive holiday shopping. Overall sales rose 4.9% from November 1 to December 24 compared with the same period last year, according to Mastercard SpendingPulse, which covers US retail transactions. Jewelry sales increased 5.9% during this period, largely because of last-minute purchases, the data provider said.

Polished loses little luster
Polished-diamond prices also increased, though only by small amounts. The RapNet Diamond Index (RAPI™) for 1-carat diamonds rose 0.3% during December. RAPI for 0.30-carat diamonds grew 1.2%, while the index for 0.50-carat stones was up 0.6%. In contrast to previous months, 3-carat diamonds showed the weakest price performance, with RAPI for that category slipping 1.7%.
   Even so, RAPI for 1 carat and below was down for the year as a whole, while 3-carat prices climbed. Rough-diamond prices showed a single-figure increase for the same period. That combination has made it hard for many rough traders and polished manufacturers to earn profits, as their margins have stayed thin.

Rough going strong
Despite that concern, the midstream continued to buy rough diamonds. Demand remained steady at De Beers’ $450 million December sight, with sales rising 6.6% compared with the same period last year, the miner said.
   For 2017 in general, however, the company’s rough sales dropped 5% to $5.31 billion, according to Rapaport calculations. Meanwhile, Alrosa’s sales jumped 36% to $334.2 million in November — though the comparison was with last year, when India’s demonetization policy brought demand for lower-value rough to a near-standstill. Even with that, the Russian miner said demand for its goods was high.
   Alrosa, for one, appears to be taking a cautious approach: It plans to reduce production by about 7% next year to 36.6 million carats, though that’s partly because of the closure of the Mir mine following a flood in August. De Beers had yet to announce its production outlook at press time.

Festivities will tell
The timing of the Chinese New Year on February 16 — about two weeks later than last year — should make January a busy time, as traders will have the whole month to replenish stock and prepare for the crucial holiday. How that festival goes could also indicate whether the Far East market has improved as much as some people hope it has.
   Still, the diamond trade might need a few more positive holiday seasons before profits start looking good.

Article from the Rapaport Magazine - January 2018. To subscribe click here.