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Market Comments 9/20/2012
Sep 20, 2012 6:00 PM
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Hong Kong show begins with steady but selective Far East demand for inexpensive lower-quality diamonds. Sales better than expected but price sensitive Chinese buyers still not buying for inventory. Rising concerns about polished shortages as Indian manufacturing remains below capacity. DTC expects small October sight. ALROSA 1H rough diamond sales +11% to $2.4B, production -15% to 16.4M Cts.
Fancies: Fancy market doing relatively well as significantly lower prices than rounds attract value conscious buyers. Weak demand and lower prices for rounds are encouraging manufacturers to shift production back to fancy shapes. Dealers report fancy shape market for excellent shapes and cuts is better and more profitable than round markets. Large fancies stones relatively stable but sales and liquidity are weak. There are extreme price differentials between excellent/fine and average cut fancy shapes. Fine cut stones may not be available as suppliers tighten discounts and resist lower prices. Square cuts doing better than curves. .
Global Markets
United States: Wholesale trading has been mixed with some improvements reported since August. There is reasonable demand for rounds, 0.50-carat to 1.50-carat, G-I, VS2-SI-, Triple Ex goods, while demand for fancy shapes is focused on cushion cuts, then radiants and oval shapes. Retailers are starting to plan their holiday inventories while expectations for the season remain mixed.
Belgium: Overall trading slowed with many businesses closed at the beginning of the week for the Jewish New Year. Suppliers are concerned that some exhibitors at this week’s Hong Kong show will become increasingly flexible to sell low as the show progresses in order to generate cash and ease their liquidity concerns. Rough trading has improved slightly with De Beers and ALROSA goods presenting slightly better margins in the secondary market.
Israel: Trading was quiet given the short business week due to the Jewish New Year and as many dealers traveled to Hong Kong for this week’s show. Polished suppliers have been encouraged by the recent increase in buyer requests and they have managed to defend their prices to an extent, particularly in SI- clarity goods. However, they also recognize that the market is fragile and that weak Far East demand at the Hong Kong show could signal further caution during the fourth quarter season.
India: Activity in the domestic polished and rough markets has been restrained due to the Jain religious festival of Paryushan and as many dealers are at the Hong Kong show. Demand is relatively steady for SI and lower clarity stones while demand for IF-VVS goods is weak. Tight liquidity and the sudden exchange rate volatility have added to overall market caution. Manufacturers continue to operate at reduced capacity while their profit margins remain tight. Rough trading has improved slightly over the past two weeks, with better activity in rough that yields SI and lower category polished.
China: Buyers are seeking clarity about prices and remain hesitant to make large purchases for inventory until they see some stability in the market. They also sense that prices may soften in the coming weeks and are testing suppliers at the Hong Kong show. While many have delayed buying until the show, wholesale activity has picked up in recent weeks as retailers prepare for the National Day Golden Week holiday period – a big wedding period – that starts October 1.
Hong Kong: The market has been focused on the AsiaWorld-Expo, the venue of the diamond pavilion at the Hong Kong show, which has seen steady but cautious diamond buying. Local demand is relatively low as dealers continue to view global economic trends with concern, while trading is being driven by buyers from China, India, and elsewhere in the Far East region. Buyers have been trying for deeper discounts but suppliers have held steady in the popular VS2-SI goods, while being more flexible on prices for the better quality VVS stones.
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