November
is an important time in the diamond industry as dealers rush to fill retailers’
holiday orders. That continued to be the case this year, with the trade having
returned to full flow following autumn religious festivals. However, there remains a
degree of weakness — evident in the levels of polished production at Indian
factories, which are lower than they were before Diwali. The
diamond-manufacturing sector is still suffering from a lack of profitability,
as relatively high rough prices do not match polished demand.
A
widening gap While
De Beers and Alrosa both reported an increase in rough demand compared with the
festival months, sightholders at De Beers’ $455 million November sale noted a
tough environment for traders. Dealers’ premiums on the secondary market were
close to zero as De Beers mainly kept prices steady — something it will probably
keep doing until January, sightholders reported. This means the miner has not
significantly adjusted prices since the first half, when it raised them amid
strong demand.
In contrast, the RapNet
Diamond Index (RAPI™) showed no major pickup in polished prices. RAPI for
1-carat diamonds declined 0.9% between November 1 and press time on November
26. RAPI for 0.30-carat diamonds was flat, while the index for 0.50-carat
stones slipped 0.2%. As with previous months, RAPI for 3-carat diamonds
performed better, rising 0.5%.
Black
Friday boost At
the moment, the midstream is looking to the retail sector to boost polished
demand. Trading on Black Friday — the unofficial start of the holiday shopping
period — was strong, with online sales rising 17% to $5.03 billion, according
to Adobe Digital Insights. Consumer confidence reached a 17-year high in
October, according to business research group The Conference Board, while the
University of Michigan’s Surveys of Consumers for November noted the “best
run-up to the holiday shopping season in a decade.”
Traders are expecting further
growth in online sales this holiday. Signet Jewelers, for one, has already
enjoyed a boost to its e-commerce revenue — which rose 56% to $80.7 million in
the third fiscal quarter that ended October 28 — thanks to the acquisition of
R2Net, the owner of e-tailer James Allen. Optimism is also high for jewelry
sales at large department stores, many of which have increased their focus on
the category. Observers are expecting chains to offer heavy discounts as well.
Traders hope these high
expectations of retail demand will filter back into the dealer market and
result in higher polished prices.
Article from the Rapaport Magazine - December 2017. To subscribe click here.