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Market Comments 1/9/2014
Jan 9, 2014 6:00 PM
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U.S. holiday season good but discounting reduced profit margins. Market sentiment improving. Indians increasing memo consignments to China with high hopes for strong Chinese New Year. Hong Kong very quiet, cautious and not as optimistic. Rough trading stable ahead of upcoming ALROSA and De Beers sales. Chow Tai Fook 3Q revenue +26%, same-store sales of gem-set jewelry +8%. Signet Jewelers notes heavy discounting during Christmas with Nov./Dec. sales +8% to $1.3B. U.S. Nov./Dec. online retail sales +10% to $46.6B. U.S. Nov. polished imports +1% to $1.9B, polished exports +23% to $1.6B.
Fancies: Ovals and pears doing well while square-shapes weaken. Availability of well-shaped diamonds tightening with shortages of select fine qualities in very large 5ct.+ sizes. Cutters returning to normal production with relatively good U.S. demand and improving Chinese demand for commercial qualities. Big expensive stones making news as global economic uncertainty drives investment demand. Off-make, poorly-cut fancies hard to sell even at very deep discounts. Buyers very selective regarding shape- and cut-quality with extreme price differentials between excellent- and average-cut fancy.
Global Comments:
United States: Wholesale diamond trading is quiet as businesses slowly return from the Christmas-New Year break. Sentiment among dealers is positive after the holiday season as they wait to see the amount of goods that were sent to retailers on memo that will be returned. Polished demand remains selective with a strong focus on commercial quality 0.30-carat to 0.50-carat, G-H, VS2-I2 diamonds. Initial reports indicate that jewelry sales outperformed general retail sales. Jewelry retailers are managing with lower inventory levels with the focus back on engagement and bridal lines, particularly with Valentine’s Day approaching.
Belgium: Activity improved as businesses returned from the Christmas-New Year break, although many polished dealers only plan to return next week. Antwerp-based Indian dealers returned from Mumbai with few goods, as shortages remain in the market and new post-Diwali production is yet to come on stream. Rough trading is stable, but dealers and manufacturers note tight liquidity ahead of next week’s ALROSA sale and the De Beers sight scheduled for the following week.
China: Wholesale trading is stable with good demand for dossiers as dealers gear up for the Chinese New Year Spring festival that begins on January 31. Activity is expected to increase in the coming weeks ahead of the holiday. The major jewelers in the region have been stocking up as they hope to drive better margins through gem-set jewelry sales as opposed to gold products, which have driven growth in the past year. Sentiment in the retail segment is positive.
Hong Kong: Diamond trading is slower than expected for this time of the year. Trading is selective and a lot of goods have been sent to retailers on memo. There is good demand for 0.30-carat to 0.50-carat, D-H, VS-SI diamonds. Retail sentiment has improved as expectations have increased for the upcoming Chinese New Year period. Jewelry retailers are preparing for an influx of Chinese tourists to boost sales at the end of the month.
India: Polished trading has improved due mainly to Far East demand for the Chinese New Year. There is a steady presence of foreign buyers in Mumbai, while domestic demand remains relatively low. Trading is price sensitive although polished prices are being supported by shortages. There is good demand seen for dossiers, 0.30-carat to 0.59-carat, G-, VS- diamonds and improving demand for 1-carat to 2-carat goods. Rough trading has improved as manufacturers slowly ramp up their factory production, although output still remains below capacity. Liquidity is tight in the manufacturing sector.
Israel: Sentiment among the larger exporters is positive as many reported that sales were better than expected in 2013. Inter-dealer trading is relatively slow as activity in the bourse is seasonally quiet after Christmas. The focus has shifted to the Far East in order to supply clients in time for the Chinese New Year. Rough trading is stable but there is uncertainty about prospective rough price trends in 2014.
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