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Rapaport TradeWire August 22, 2014

Aug 21, 2014 6:00 PM   By Rapaport
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  Rapaport TradeWire  
Rapaport TradeWire
RAPAPORT NEWS SERVICE | Aug. 22, 2014   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment Aug. 22, 2014


Markets relatively quiet and conservative. Steady U.S. demand for commercial quality SI-I1 diamonds helping Indian market. Major Chinese buyers have completed large purchases. HK market improving before very important Sept. show but Chinese consumer demand remains cautious. De Beers keeps average prices stable at large Aug. sight but rough trading slows and premiums weaken on secondary market. Gem Diamonds 1H revenue +54% to $149M, net profit +129% to $20M. Dominion 2Q sales +6% to $277M with rough prices +8% in 1H. India’s July polished exports -11% to $1.9B, rough imports +14% to $1.9B. Belgium’s July polished exports +5% to $1.4B, rough imports +20% to $1.2B.



RapNet Data: Aug. 21
Diamonds   1,176,379
Value $7,418,146,836
Carats   1,288,987
Average Discount -27.07%

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RAPI Chart

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  QUOTE OF THE WEEK
  We are observing enough steady demand for all categories of rough diamonds, but most of all for those that are used in the production of diamonds for the U.S. market. The second intensely growing market is India. China has somewhat slowed its growth but that was expected. Consumption in China, all the same, remains large enough. The European market is not very active at the moment.

Vladlen Nogovitsyn | ALROSA

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RETAIL & WHOLESALE  
 
U.S. Jewelry CPI -5%

The U.S. consumer price index (CPI) for jewelry declined 4.5% year on year to 171.97 points in July. However, the reading has been slowly inching higher since the index reached the lowest point of the year so far at 169.36 points in May. The CPI for watches, meanwhile, was down 0.5% year on year to 123.58 points.

The average price of gold in July was about 3% lower and platinum was about 2% lower compared with July 2013. The RapNet Diamond Index (RAPI), the global benchmark for polished diamond prices, fell 3.5% year on year for 1-carat diamonds in July, while RAPI for 3-carat diamonds dropped 1.9%. However, RAPI for 0.30-carat diamonds jumped 13% and the index increased 9.8% for 0.50-carat stones. By comparison, the CPI for all product categories in July increased 2% year on year to set a new record high of 237.91 points.



 
DGSE Notes Higher Jewelry Sales

DGSE Companies Inc. reported that revenue dropped 26.3% year on year to $17.52 million in the second quarter that ended on June 30. Costs of goods sold were reduced by 30.6% to $14.51 million. Losses from discontinued operations surged to $3.91 million and DGSE's quarterly loss jumped fourfold to $4.45 million during the period.

DGSE, which wholesales and retails jewelry, diamonds, fine watches, precious metal bullion and rare coin products, closed its Southern Bullion Coin and Jewelry division this year, which accounted for the high rate of discontinued operations. In terms of retail activity, the company noted a significant decrease in both bullion and scrap sales during the quarter, a result of the drop in gold prices; however, this was partially offset by strong growth in jewelry sales. Furthermore, gross profit improved to 17.2% of sales compared with 12.1% one year ago, as high-margin jewelry sales increased and low margin bullion sales fell, according to the company.



 
De Beers Explores Reselling Methods

De Beers created a program through its independent entity, the International Institute of Diamond Valuation (IIDV), that is meant to evaluate and understand consumer diamond reselling activity in the U.S. and will being operating with a small number of retailers to improve the process.

Tom Montgomery, the senior vice president of strategic initiatives at De Beers, explained that some retailers have expressed reservations about how the current reselling experience could impact consumers' views on diamond equity. Nonetheless, the only way to gain a true understanding of diamond reselling activity is to run assess the market and measure how the practice impacts consumer perceptions of diamonds.



 
Tiffany & Co. Introduces 'T'

Francesca Amfitheatrof, the design director at Tiffany & Co., created "Tiffany T" to mark a new era of jewelry that is dedicated to great cities of the world and attracts consumers who gravitate toward art and culture. In the first launch of the collection, she said Tiffany T reflects the modern life and relentless energy of New York. Tiffany T designs play up angles and curves, and are manufactured in 18-karat gold -- rose, yellow and white -- and sterling silver for wide cuffs, minimal bracelets, chains of varied lengths, pendants, earrings and stackable rings. Some of the pieces feature diamonds and high-quality gemstones.

Sterne Agee used the launch as an opportunity to reiterate Tiffany & Co.'s price target of $108 and rating of "Buy." The company added that even if the collection falls outside of entry-level budgets, the story surrounding Tiffany T generates a sought-after luxury halo that drives traffic and aspirational customers. Tiffany & Co. reports financial results on August 27.



 
Signet Launches Sofia Vergara Collection

Sofia Vergara partnered with Signet Jeweler's retail store Kay® Jewelers in the U.S. to launch the jewelry collection, SOFIA VERGARA so Sofia™. The collection crosses a range of design elements and is described as elegant, playful, vibrant and sexy, with bold statement necklaces and earrings as well as shimmering bracelets.

The SOFIA VERGARA so Sofia collection includes rings, necklaces, earrings and bangle bracelets, many of which are set with diamonds and semi-precious gemstones, such as amethyst, tanzanite and topaz. Settings in 10-karat gold and sterling silver feature intricate details that are meant to add a feminine touch. Each piece also includes a hidden natural emerald to symbolize the designer's home country of Colombia.



 
Seiko Opens in Manhattan

Seiko Corporation of America opened its first Seiko boutique in the U.S. at 510 Madison Avenue in New York City. The New York Seiko boutique is primarily dedicated to Seiko's prestigious collections, including Astron and Grand Seiko. It also unveils collections never before sold in the U.S., including Galante and Credor and various boutique exclusives, including the Prospex collection. The store follows design standards from boutiques in Paris, Amsterdam, Hong Kong and Cairo as well as the original Wako luxury specialty store opened in 1881 in Tokyo.



 
U.S., India Issue Trademarks

The U.S. Patent & Trademark Office issued the trademark "Brilliance In Motion" to Ostbye & Anderson Inc. of Minnesota with registration number 4585986. Suashish Jewels Inc. of Irving, Texas received the trademark "Lovebeat Diamond" with registration number 4585892. Robbins Delaware Diamonds LLC of Newark, Delaware received the trademark "YEAH!" with registration number 4583173. Lou Maddaoloni Jewelers Inc. of Huntington, New York received the trademark "Maddaloni Jewelers" with registration number 4583266.

In India, the Office of The Trade Marks Registry renewed the trademark "GCI" for Gemological Centers (GCI) Ltd. of Ramat Gan, Israel on July 14 with registration number 1823989.



 
Scott Kay Hires Three Executives

Scott Kay Inc. appointed Susan Chandler to the role of chief merchandising officer, named Tom Kennedy as the brand's chief commercial officer and selected John Croston as its chief supply chain officer. All three senior-level executives joined Scott Kay from David Yurman Inc. David Minster, the CEO of Scott Kay, said these executive hires were part of the brand's strategic growth initiative that targets increasing annual revenue to $500 million.



 
Panama Exchange Appoints Two Directors

The Panama Diamond Exchange appointed Hecliton Santini Henriques, the president of Instituto Brasileiro de Gemas e Metais Preciosos (IBGM), Brazil's leading gem and jewelry trade association, and Dr. Luciano Pataro, the founder and director of Gold America S.A. in Panama to its board.

The two new directors join other principal industry leaders who have been named directors of the Panama Diamond Exchange, including Ernest Blom, the president of the World Federation of Diamond Bourses (WFDB); Gaetano Cavalieri, the president of CIBJO, the World Jewellery Confederation; Maxim Shkadov, the president of the International Diamond Manufacturers Association; Avi Paz, honorary life president of the WFDB and the Israel Diamond Exchange (IDE); Roberto Coin, a leading Italian jewelry designer and producer; Shmuel Schnitzer, the president of the IDE and honorary life president of the WFDB, and Reuven Kaufman, the president of the Diamond Dealers Club of New York. Two additional directors will be announced shortly, thus completing the composition of the board.



 
Armenia Bank Accepts Diamond Collateral

VTB Bank in Armenia now offers loans to its customers that are secured with diamonds and diamond jewelry, according to ARKA news. Loans are reportedly being arranged quickly with proper citizen identification and through at four of VTB's branch offices. Those who are younger than 21 and older than 65 are not eligible. Loans are made in local currency at a rate of 22% and as long as 540 days. VTB Bank in Armenia is a subsidiary of Russia's second largest bank with the same name.



MINING  
 
Dominion's 2Q Revenue +6%

Dominion Diamond Corporation reported that rough diamond sales rose 5.9% year on year to $277.3 million for the second quarter that ended on July 31. The company sold 1.511 million carats, representing an increase of approximately 16% compared with one year earlier. 

In addition, Dominion stated that average rough diamond prices have risen 8% since January. The company's 40% share of production from the Diavik diamond mine jumped 44.5% to 870,000 carats. Dominion's production from the Ekati diamond mine surged to 802,000 carats compared with 483,000 carats one year earlier. Rough inventory on July 31 totaled $315 million, of which $45 million represent discretionary goods.



 
Gem Diamonds Doubles Profit

Gem Diamonds reported that revenue rose 54% year on year to $148.9 million in the ‎first half of 2014, driven by an increase in carat volume sales coupled with higher diamond prices. The mining company's profit more than doubled to $19.7 million. Strong demand for rough diamonds from Letšeng helped to drive the average price per carat up 58% to $2,747.

Gem Diamonds anticipates that the second half of the year will experience strong price dynamics as well. Letseng's first half production rose 29% to 54,678 carats, while the volume ‎of sales grew 14%.
 


 
ALROSA Observes Stronger Prices

ALROSA stated that a stable market resulted in rough price growth in the 6% to 7% range, above plan of 5%, according to Interfax. The company will release first half results on August 29, but it has observed stable demand in the U.S., rapid growth in India and moderate demand from China. Europe's market is quiet. In addition, lenders are more willing to extend credit as profit improves for many diamond players and loans are being repaid by manufacturers, according to the report.

In other news, ALROSA is working with Russia's Finance Ministry to regulate the synthetic diamond trade in the name of transparency and full disclosure.



STATS  
 
Japan

  $Mil. June %Chng. $Mil. YTD %Chng.
Polished diamond imports $80 7% $445 8%



 
Belgium

  $Mil. July %Chng. $Mil. YTD %Chng.
Polished diamond exports $1,382 5% $8,955 6%
Polished diamond imports $1,027 9% $9,152 16%
Net polished exports $355 -4% ($197)  
         
Rough diamond imports $1,226 20% $9,086 13%
Rough diamond exports $1,797 17% $9,939 9%
Net rough imports ($571)   ($853)  
         
Net diamond account $926 0% $656 -59%



 
India

  $Mil. July %Chng. $Mil. YTD %Chng.
Polished diamond exports $1,852 -11% $11,977 -4%
Polished diamond imports $634 -1% $4,000 -9%
Net polished exports $1,218 -14% $7,977 -2%
         
Rough diamond imports $1,912 14% $11,205 9%
Rough diamond exports $140 0% $921 -22%
Net rough imports $1,772 15% $10,284 12%
         
Net diamond account ($554)   ($2,307)  



ECONWATCH  
 
Diamond Industry Stock Report

U.S. shares all closed higher this week, led by Blue Nile (+9%), while Hong Kong was mainly lower. European shares were also in positive territory, led by Damiani (+6%). Indian shares were volatile with C. Mahendra (-18%) and Gitanjali (+14%) defining a wide trading range. Mining shares mainly lower with Lucara (-11%) showing largest decline. View the extended stock report.

  Aug. 21 Aug. 14 Chng.  
$1 = Euro 0.753 0.748 0.005  
$1 = Rupee 60.59 60.92 -0.3  
$1 = Israel Shekel 3.52 3.47 0.05  
$1 = Rand 10.71 10.55 0.16  
$1 = Canadian Dollar 1.09 1.09 0.00  
         
Precious Metals        
Gold $1,277.00 $1,314.00 -$37.00  
Platinum $1,412.00 $1,461.00 -$49.00  
         
Stock Indexes       Chng.
BSE 26,360.11 26,103.23 256.88 1.0%
Dow Jones 17,039.49 16,713.58 325.91 1.9%
FTSE 6,777.66 6,685.26 92.40 1.4%
Hang Seng 24,994.10 24,801.36 192.74 0.8%
S&P 500 1,992.37 1,955.18 37.19 1.9%
Yahoo! Jewelry 986.73 971.24 15.49 1.6%




INDIA MARKET REPORT  
 
Polished and Rough Trading Activity

Polished trading is  slow and the general mood is cautious and price sensitive, especially given tight liquidity and delayed payments.     Read the full report.






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