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Rapaport TradeWire May 3, 2013

May 2, 2013 6:00 PM   By Rapaport
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Rapaport Weekly Market Comment May 3, 2013

Basel show disappoints with selective demand for top quality large stones. Diamond traders believe Basel show is not worth the money. Markets cautious with low volume trading. RapNet Diamond Index (RAPI) for 1ct. flat in April. Gold price spurs jewelry demand during China’s May Day holiday but is unlikely to significantly boost U.S. Mother’s Day sales. Blue Nile 1Q sales +17% to $97M, profit $832K vs. $154K. De Beers estimates global diamond jewelry sales +3% in 2012 with China +8%. ALROSA’s 2012 diamond sales +9% to $4.4B, profit +26% to $1.1B. Rio Tinto opens Argyle underground mine, will boost annual production to 20M cts by 2015. Japan’s March polished +3% to $75M. OECD meets to discuss responsible diamond sourcing standards.

RapNet Data: May 2
Diamonds   1,002,032
Value $6,450,333,159
Carats   1,092,311
Average Discount -27.29%

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  Basel is an expensive show and not worth [the expense]. Europe is not a market and you can’t ‎compare this show to Hong Kong.

Leibish Polnauer | Leibish & ‎Co.

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Diamond Demand Growth Slows in 2012

De Beers said that consumer demand for diamonds grew by 2 percent to 3 percent in 2012, a considerable drop from the 10 percent rate recorded in the previous two years. The markets were negatively impacted by weakening macroeconomics and policy ‎uncertainties in India and China, as well as consumer caution in developed markets. ‎

The survey measured growth according to polished diamond wholesale prices in U.S. ‎dollars. Sales in China rose between 8 percent and 10 percent, which was the best performance, while demand in the U.S. and Japan grew 5 percent to 6 percent. The market in India ‎contracted by 5 percent in dollar terms, largely due to the depreciation of the rupee. However, diamond jewelry sales in rupee in India rose 9 percent, while sales measured in yen increased 2 percent in Japan.

The U.S. remained the largest diamond consumer market with approximately 37 percent ‎of the market share, down from 42 percent in 2007. China represented about 11 percent of the ‎market, followed by Japan with 10 percent and India with around 9 percent. ‎ Bridal and engagement rings continued to be the best selling products in the U.S.; however, there was no ‎clear leading product categories in India and Japan. De Beers reported ‎that in China, solitaire diamond products were prevalent catering mainly for bridal ‎and wedding anniversary occasions.‎

The most popular category of polished diamonds varied ‎in different markets. In the U.S., the focus was on 0.50 carat to 0.99 carat, H+, SI goods, while in ‎China the most popular range was 0.30 carat to 0.49 carat, G to H, VS diamonds. In Japan, the best ‎sellers were 0.18 carat to 0.49 carat, H+, SI goods and in India they were 0.02 carat to 0.07 carat, G to H, VVS to ‎VS stones.‎

ALROSA's Profit +26%

ALROSA reported that its profit rose 26 percent year on year to $1.08 billion (RUB 33.6 billion) ‎in 2012 as it increased the volume of sales, while rough diamond prices declined. ‎ The Russia-based mining company noted that the average price of its gem-quality diamonds ‎fell 2 percent to $193.80 per carat during the year. Prices peaked at $211.30 per carat in the third ‎quarter but fell to $183.20 per carat in the fourth quarter.‎ Still, revenue from diamond sales grew 9 percent to $4.36 billion (RUB 136.4 billion), while total ‎group revenue, including from its transportation, trading, social infrastructure and construction ‎segments, rose 10 percent to $4.82 billion (RUB 150.9 billion).‎

What Was Hot at Basel?

Traders at the Baselworld show told Rapaport News that there was a strong market for unique stones with demand driven by Far East and Middle East ‎consumers.‎ European high-end retailers are in the market for special stones and they are willing to pay premium prices but not looking to make large quantity purchases.‎ Demand for fancy colors was strong, particularly for fancy intense pinks and blues.

‎Exotic colors such as orange and greens also generating a lot of interest.‎ There was very good demand for special large stones: 10-carat-plus, D, IF and steady demand for large, commercial-quality diamonds: 10-carat-plus, F to H, VS to SI. ‎Nice-make fancy shapes were very strong with pear-shape, 0.70-carat to 1.99-carat, very hot and in short supply, while nice-make hearts and ovals were hard to find with steady Far East demand, and emeralds were steady.‎ The strongest sellers in commercial-quality goods remain 0.30-carat to 0.40-carat, F-to-G, VS2-to-SI1 diamonds. ‎

Blue Nile's Profit Jumps

Blue Nile's first quarter sales rose 16.9 percent year on year to $97.1 million for the period that ended on March 31, while cost of sales jumped 17.2 percent to $79.5 million. The online retailer of diamonds and jewelry reported profit of $832,000, or 7 cents per share, compared with $154,000, or 1 cent per share, one year ago.

U.S. engagement jewelry sales jumped 19 percent year on year to  $55.3 million and non-engagement sales rose only 7 percent  to $24.2 million. International sales increased 25 percent to $17.6 million. Excluding the impact from changes in foreign exchange rates, international sales increased 26 percent.

Gross profit as a percent of net sales fell to 18.2 percent from 18.4 percent. Cash and cash equivalents at the end of the quarter totaled $40.5 million, according to the company's statement.

Charles & Colvard Reports Profit

Charles & Colvard reported that first quarter sales rose 56 percent year on year to $6.51 million, while costs and expenses rose only 22 percent to $5.98 million for the period that ended on March 31. The company reported profit of $306,273 compared with a loss of $375,846, it held cash and liquid investment assets of $13.1 million and reported no long-term debt at the close of the quarter. Loose moissanite gemstone sales increased 77 percent to approximately $4.3 million in the first quarter, while finished jewelry sales increased 25 percent to approximately $2.2 million.

JCPenney Gets a Cash Boost

 Hedge fund manager George Soros purchased 17,386,361 shares in beleaguered JCPenney on April 25. The Soros Fund Management disclosed that it now owns a 7.9 percent stake in the retailer.  Soro's purchase places his fund as one of JCPenney's five largest shareholders. Hedge fund manager Bill Ackman, the largest shareholder, owns about 18 percent. JCPenney has experienced more than a year of double-digit, quarterly sales declines and reported a loss of nearly $1 billion in 2012. The board fired CEO Ron Johnson in April and rehired his predecessor, Myron Ullman two weeks ago.

The company has also entered into a loan facility agreement with Goldman Sachs Bank USA for a $1.75 billion senior term loan. The facility will be secured by real estate and interest in substantially all other assets of the company and certain of its subsidiaries. Under the terms of this credit, the proceeds of the loan facility may be used to fund ongoing working capital requirements and other general corporate purposes and to amend, acquire or satisfy and discharge the company's outstanding debentures due in 2023.

Platinum Trends, Designs From New York

WATCH NOW: Platinum Guild International (PGI-USA) in conjunction with JCK Las Vegas are preparing for the fourth annual JCK 2013 Platinum Innovation Awards, held at JCK Las Vegas at Mandalay Bay, May 31 through June 3, 2013. The competition acknowledges innovation and skill in platinum design in both bridal and fashion jewelry. PGI-USA showcases some of the pieces in this year's competition, highlighting the versatility of platinum. Winners will be announced on June 2.

Georg Jensen Acquires Danish Silver

Jewelry brand Georg Jensen acquired Danish Silver, an authorized dealer of Georg Jensen antique hollowware, jewelry and watches. Danish Silver was founded by Gregory and Anna Kristina Pepin in 1999 and has carried the world's largest collection of Georg Jensen Antique silver available for purchase. Now the Georg Jensen Antique collection will be exclusively available in Georg Jensen flagship stores in Copenhagen, New York and London as dedicated Georg Jensen Antique shop-in-shops. Georg Jensen Antiques will also continue to show at major antique events and fairs in the U.S. as well as expositions and collector events in Europe and Asia.

Tiffany Expands in Kentucky

While the U.S. has lost millions of skilled manufacturing jobs in the past decade, Tiffany & Co. is countering that trend and announced it was expanding its manufacturing operations in Lexington, Kentucky, creating 75 new, full-time jobs and investing $2 million in the state's economy. The expansion comes less than two years after Tiffany & Co. opened its facility in Lexington.

Kentucky's governor, Steve Beshear, said, "There are few companies in the world that can boast the type of brand recognition that Tiffany & Co. enjoys, and we are proud to have its magnificent products crafted right here in the Commonwealth." 

In November 2010, Tiffany & Co. first broke ground on its 25,000-square-foot jewelry manufacturing facility on four acres of land in the Blue Grass Business Park. The grand opening was held in September 2011 and it now employs 125 professionals who produce a variety of the high-quality jewelry, including diamond engagement rings.

Survey Suggest Tapping 'Group Gift' Idea

The National Retail Federation's (NRF) Mother’s Day survey, conducted by BIGinsight, revealed that expected spending on gifts and outings this year will increase 11 percent year on year to $168.94 per shopper. Of those who celebrate Mother's Day, or roughly 86 percent of respondents, 34 percent said they intend to buy jewelry this year, up three percentage points from 2012 and the highest level since the survey began tracking this segment in 2007.

Budgetary constraints will keep many families on the prowl for the perfect ''group gift,'' according to BIGinsight, which presents a marketing opportunity for retailers to tap this crowd. The average amount shoppers expect to spend on jewelry was $100.55, up from $97.19 one year ago and the highest average so far. Those consumers who earn less than $50,000 per year expect to spend an average of $74.94 on jewelry, while those earning more than $50,000 plan to spend an average of $122.86 on their jewelry purchase for Mother's Day. 

Survey respondents also confirmed their intention to make purchases in a store, with 37 percent planning to visit a jeweler (or florist, gift shop or electronics store), 34 percent expecting to shop in a department store and 29 percent planning to buy online or in a discount store. The survey found that 65 percent of respondents purchase a gift for their mother or stepmother, 24 percent buy a gift for their wife and 11 percent for a daughter, rounding out the top three choices.

U.S. Confidence Dips

U.S. consumer confidence fell slightly in April 2013 to 68.1 points from 69.2 points one year ago, according to the Conference Board Consumer Confidence Index. The Present Situation Index surged 18 percent year on year to 60.4 points, however, the Expectations Index fell 10 percent to 73.3 points, according to the Conference Board. Consumer confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester.

Ben Bridge Selects a Winner

Ben Bridge Jeweler selected a grand prize winner for its $100,000 Wedding of the Century contest from 40,000 entries to make a ''fairytale wedding'' possible for one Sunnyvale, California couple. The retailer selected Hilary Stevens, an education manager at a children’s theater, and her fiancé, David Campbell, for a grand prize package valued at more than $100,000. The contest was co-sponsored by TAG Heuer, Ikuma Canadian Diamonds and Hawaiian Airlines and included $40,000 in jewelry, including a 2-carat Ikuma Canadian diamond engagement ring, ArtCarved men’s wedding band, Mikimoto pearl earring studs and TAG Heuer His & Hers watches. The package also included cash to plan the wedding and a honeymoon in Hawaii. Ben Bridge also awarded 100 finalists various prizes of fine jewelry, while 2,500 weekly winners took home $25 Ben Bridge gift cards.

PGJ Creates Special Collection

Pure Gold Jewellers (PGJ) created an Akshay Tritya Collection featuring a special range of gold, diamond and colored gemstone jewelry to mark the auspicious festival. The collection consists of four different pendants, each with matching earrings and rings in floral designs. The retailer created designs that it said were lively and colorful with purple, green and red center stones all of which are encrusted with diamonds.

James Allen Partners With Diamond in the Rough

Jeweler James Allen signed an exclusive partnership with Diamond in the Rough to offer more than four hundred natural rough diamond ring styles and custom design options online. Diamond in the Rough rings are designed to accentuate the natural beauty and character of a rough center stone. James Allen stated that with its own online ''Display Technology,'' shoppers can rotate and view each rough diamond design in 360 degrees to better appreciate the natural stone's elegance. Diamond in the Rough was founded in 2005 by Daniel Eskapa and it sells bridal rings through its website, but other collections are sold in TWO by London, Neiman Marcus, Borsheims, Padani, Reinhold Jewelers, Moussaieff and Chi Chi Rico.

Sears Launches Daily-Deals

Sears Holdings Corp. launched its first daily-deal coupon, offering 15 percent off through Google Offers for purchases in stores. Linking shoppers' online daily-deal purchases with in-store visits is an example of Sears' efforts to reverse declining sales. In April, Sears introduced a new business unit, Shop Your Way Brands, to develop celebrity-driven fashion and lifestyle brands. The retailer has stabilized sales recently with fourth-quarter revenue up 0.8 percent, following a single-digit decline one year earlier.

Montblanc Pays Tribute to Mandela

Montblanc paid tribute to Nelson Mandela through a partnership with the "Midnight Moment: A Digital Gallery" reception held in New York and in the company of two of Mandela's grandsons. The reception included views of the "Midnight Moment" screens with floor-to-ceiling windows overlooking Times Square, where guests enjoyed a firsthand viewing of "The Power of Words" showcase. The "Midnight Moment" is a synchronized creative content series that broadcasts selected videos in Times Square every night in a three-minute countdown to midnight. Montblanc is presenting the Midnight Moment video project as part of a series of worldwide programs for the Montblanc "Signature for Good" initiative, which benefits UNICEF's Schools for Africa and School for Asia initiatives, as well as UNICEF education programs in Latin America. With a heritage deeply rooted in the culture of writing, Montblanc shares Mandela's lifelong commitment to emphasizing the importance of writing and the power of words.

Industry Stakeholders Meet With OECD

A multi-stakeholder group comprised of some  50 representatives from industry, civil society and government met at the Organisation for Economic Cooperation and Development (OECD) in Paris to discuss responsible supply chains for precious stones. The meeting was hosted by the Fafo Institute for Applied International Studies, Jewelers of America, Signet Jewelers Ltd., the U.K. Foreign and Commonwealth Office and the U.S. Department of State.

The meeting was structured as an open discussion. Participants stressed the need for ongoing and continuous improvement in responsible sourcing practices due to evolving risks in trade with conflict and human rights abuses. Participants confirmed that efforts to advance responsible sourcing for precious stones should complement and not undermine or replace existing initiatives, such as the Kimberley Process Certification Scheme and the recent UN initiative for colored gemstones.

There was interest in further examining existing and potential due diligence processes in support of responsible sourcing of precious stones, including the artisanal and small-scale mining sectors. Future discussions on this topic will remain open to all interested parties.

AGS Awards Boyajian

Bill Boyajian was awarded the 2013 American Gem Society (AGS) Robert M. Shipley award on April 26. Boyajian received the honor based upon his expertise and commitment to the field of gemology, personal business, the jewelry industry and the AGS. His book, ''Developing the Mind of a Leader – Your Path to Lead and Inspire People,'' has jettisoned him to the speaking circuit and has established him as a sought-after business consultant.

Diamond Historian Balfour Passes Away

Noted diamond historian, Lord Ian Balfour passed away on April 14. Lord Balfour was the author of "Famous Diamonds" that chronicled the history of some of the world’s legendary diamonds, including the Hope Diamond, the Cullinan I and the Koh-i-Noor, among others. Lord Balfour was born in 1924 and worked at De Beers for many years. He started writing about diamonds in 1959, with "Notes on Famous Diamonds." He was working on his sixth edition of the book at the time of his death.

NAJA's Assoc. Director Tenhagen Passes Away

Joseph Tenhagen, publisher of the ‘’Diamond Value Index,’’ passed away on April 27 at the age of 79, ending a 40-year legacy as an accomplished appraiser and consultant to the gem trade and jewelry industry. From 1981 to 1984 he was president of the Accredited Gemologist Association. Tenhagen earned is Master Gemologist Appraiser title from the American Society of Appraisers from 1983 to 1995. Tenhagen joined the National Association of Jewelry Appraisers (NAJA) in 1992 and served as its associate director when Dr. James Jolliff was executive director as well as with the current executive director, Gail Brett Levine. Tenhagen was a charter member, past president and past secretary of the Diamond Dealers Club of Florida until 2005.

JVC Publishes Guide on Conflict Minerals

The Jewelers Vigilance Committee (JVC) published its “Essential Guide to Conflict Minerals and the Dodd Frank Act” instrument. The guide provides guidance on the Dodd Frank legislation as it applies to the gold, tungsten or tin supply chain. The Dodd Frank Act, passed in 2010, is a significant law that will have a wide ranging impact on the jewelry industry in addressing "conflict minerals” and for reporting disclosure requirements. The JVC offers practical steps to meet the needs of their customers that must now file mineral reports with the SEC.

UN Maintains Diamond Sanctions on Cote d'Ivoire

The UN Security Council unanimously renewed diamond sanctions and an arms embargo on Cote d'Ivoire for another year as the West African nation continues to battle with security issues. The council stated that all parties shall take the necessary measures to prevent the direct or indirect supply, sale or transfer of rough diamonds from Cote d'Ivoire.

USPTO Approves Trademarks for Michael Hill

The U.S. Patent & Trademark Office (USPTO) issued the trademark ''Michael Hill Professional Care Plan'' to jewelry retailer Michael Hill Franchise Pty. Ltd. in Australia. The description of the trademark covers a vast range of products in addition to retail and wholesale services. The USPTO also approved the trademark ''Evermore Dream a Little Bigger,'' which consists of stylized wording, where the letter "V" is represented by a stylized cut gem. This trademark also applies to products and services under the franchise's brand.

Rio Tinto Opens Argyle Underground Mine

Rio Tinto opened its Argyle underground diamond mine, which the company projects will supply rough diamonds beyond year 2020. The capital improvement project totaled about $2.2 billion and will restore annual production to around 20 million carats, ‎compared with only 8.5 million carats this past year. The mine, known for its rare pink diamonds, uses the latest in block caving technology and is ‎the first of its kind in Western Australia. Approximately 800 million carats of diamonds have been ‎mined at Argyle since its launch 25 years ago.

Lucara Hosts Special Tender

Lucara Diamond Corp. opened its first large and exceptional rough diamond tender, which will end on May 22. This diamond tender features 15 single diamond lots from production out of the company's Karowe mine in Botswana, including a recently recovered 239 carat diamond. ‎The junior mining company has scheduled viewings in Gaborone, Botswana this week and then interested buyers may view goods in Antwerp from May 3 until the tender closes.

Diamond Industry Stock Report

U.S. stocks were mainly lower, but JCP (+10%) rose for the first time in weeks. European shares were all higher except for Theo Fennell (-10%). Indian shares mostly higher, except Lypsa Gems was flat and Winsome (-33%) continued a steep decline. Dominion Diamond (+10%) led mining shares, but Firestone (-9%), Gemfields (-9%) and Stellar (-6%) brought the index lower. View the extended stock report.
  May 2 Apr. 25 Chng.  
$1 = Euro 0.760 0.768 -0.008  
$1 = Rupee 53.84 54.10 -0.3  
$1 = Israel Shekel 3.58 3.60 -0.02  
$1 = Rand 8.95 9.09 -0.14  
$1 = Canadian Dollar 1.01 1.02 -0.01  
Precious Metals        
Gold $1,467.50 $1,465.00 $2.50  
Platinum $1,496.00 $1,463.00 $33.00  
Stock Indexes       Chng.
BSE 19,735.77 19,406.85 328.92 1.7%
Dow Jones 14,830.96 14,700.80 130.16 0.9%
FTSE 6,460.71 6,442.59 18.12 0.3%
Hang Seng 22,668.30 22,401.24 267.06 1.2%
S&P 500 1,597.53 1,585.17 12.36 0.8%
Yahoo! Jewelry 1,215.21 1,197.73 17.48 1.5%

Polished and Rough Trading Activity

Summer holiday season is keeping the markets quiet, really no impact from Basel and although demand is soft, price differentials continue between buyers and sellers. There are shortages in the market in SI and lower. Tight liquidity persists.   Read the full report.  


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