The
diamond trade was optimistic in January after strong holiday sales raised hopes
retailers would buy in large quantities to replenish their stocks. Jewelers
have plenty of selling opportunities, with Valentine’s Day and the Chinese New
Year coming up in February, and US Mother’s Day not far off in May.
“While [the diamond market]
experienced weakness from July to October 2017, which is seasonally the slowest
time for the rough-diamond market, [it] started to strengthen before the
calendar year-end, further to positive momentum around the festive selling
season,” Petra Diamonds CEO Johan Dippenaar said in a January investor call
transcribed by Seeking Alpha.
Taking
stockThe
strong sentiment led to increased demand and shortages in certain categories.
Polished-diamond prices reflected this, with the RapNet Diamond Index (RAPI™)
for 1-carat diamonds growing 1.8% between January 1 and press time on January
26. RAPI for both 0.30- and 0.50-carat stones climbed 1.9%, while prices of 3-carat stones increased 1.1%.
That positivity filtered
through to the rough market. De Beers’ sales total of $665 million at its
January sight was the biggest in a year, as polished manufacturing increased
and buyers sought goods to meet the seasonally strong demand. Premiums — the
markup at which sightholders resell De Beers goods to other dealers on the
secondary market — rose to more than 6% at De Beers’ January sight from 2.8% in
December, according to brokerage site Bluedax.
Price
vs. productionThe
industry remained hopeful of a continued improvement amid growth in major
markets, with US consumer spending 4.5% higher in 2017, according to the Bureau
of Economic Analysis. Meanwhile, Hong Kong’s government gave a positive
short-term outlook for its retail sector.
“There is cautious optimism
on [rough] diamond pricing in 2018 after positive initial year-end retail
numbers out of the US and China,” said Stuart Brown, CEO of Firestone Diamonds.
However, even as the trade
appeared confident, some rough-diamond producers have taken a guarded approach
to 2018. Alrosa and Rio Tinto both plan to reduce their output compared with
last year, with the former saying it would sell inventory to maintain supply.
Petra Diamonds also lowered its production forecast for the fiscal year ending
June 30, following a decision to maintain higher average prices at its Cullinan
mine at the expense of volume.
Once the February holidays
are over, the sector will look toward the Hong Kong shows in late February and
early March. Activity at those events should indicate whether the industry will
approach the rest of 2018 with caution, bullishness, or a mix of the two.
Article from the Rapaport Magazine - February 2018. To subscribe click here.