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Rapaport TradeWire November 14, 2014
Nov 13, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Nov. 14, 2014
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Polished markets cautious. Cutters offering lower prices to improve cash flow and buy high-price rough in order to maintain next year’s sight allocations. Liquidity situation significantly worsened by China’s restrictions on money transfers. Large turnout at Israel Diamond Week in NY. De Beers Nov. sight estimated at $550M with some rejections. Lucara 3Q profit nearly triples to $42M. Sotheby’s Geneva sells $95.8M (90% by lot) with Graff buying pair of oval, 20.05ct. and 20.06ct. D, IF, diamond earrings for $7.1M ($178,188/ct.). Christie's Geneva sells $150M (89% by lot) as Graff buys pear, 6.95ct., fancy vivid blue, SI2 and pear, 6.79ct., fancy pink, VS2 ear pendants for $15.8M.
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RapNet Data: Nov. 13
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| Diamonds |
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1,445,834 |
| Value |
$8,197,455,850 |
| Carats |
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1,466,912 |
| Average Discount |
-28.11% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
Israel diamond week in New York is a tremendous event all due to the solid relationship we built with our friends from the Israel Diamond Exchange, whom I’m very grateful for and proud to work with to help move our industry forward.
Reuven Kaufman | Diamond Dealers Club
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.
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INDUSTRY
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De Beers Sight Estimate at $550M
De Beers November sight closed with an estimated value of $550 million. Minor adjustments to prices and assortments were reported in different categories. Sightholders observed that while the adjustments slightly improved the profitability of some boxes, certain categories still cannot be manufactured into polished diamonds at a profit. Some expressed disappointment that De Beers did not reduce overall prices at the sight, given the continued decline in polished prices. The market remains challenging for many manufacturers.
De Beers stated that it had not made a sizable correction to rough prices because management believes the fourth quarter Christmas shopping season would be strong in major consumer markets, ultimately improving liquidity across the pipeline. Rough trading on the secondary market reflected tight liquidity and thin profit margins among manufacturers, with most boxes trading at a discount and on credit terms.
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Buyers, Sellers Gather for Diamond Week
The New York Diamond Dealers Club, in partnership with the Israel Diamond Exchange, hosted more than 160 exhibitors and 700 buyers for a third diamond trading event in Manhattan. While nearly all agreed these events in New York and Israel solidify important business relationships, actual trading was mixed.
The U.S. market, while stable, continues to experience weak demand for large stones (above 3 carats), and subdued trading for 2-carat to 3-carat goods. Nonetheless, there were, at least, a few sales of very large diamonds. One exhibitor observed that the wholesale market for large rounds right now is actually better in Hong Kong and Israel. In addition, there was little demand for melee and stars and demand for 0.75-carat to 1-carat goods was soft.
However, buyers were snapping up rounds in the 0.25-carat and 0.60-carat commercial-quality range, while 1-carat to 1.50-carat, mainly SI, diamonds were also in good demand.
There was fair interest in fancy yellow diamonds, but better demand for pinks and blues. Overall, buyers were mainly interested in filling immediate orders and sellers expressed hope that more retailers would attend this trade event in the future.
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Reject Those Selling Over-Graded Diamonds
Martin Rapaport, the chairman of the Rapaport Group, released a comprehensive editorial, “Honest Grading,” that discloses the over-grading of over 100,000 diamonds, valued at more than a $1 billion. Rapaport calls upon the legitimate jewelry trade to reject those selling over-graded diamonds that fool consumers into believing they are getting better diamonds than they are receiving. It is an unfair trade practice to grade diamonds using Gemological Institute of America (GIA) grading terminology, while applying alternative standards that over-grade the diamonds.
“The over-grading of diamonds is a legal and ethical issue challenging the legitimacy of the diamond and jewelry trade. Consumers must be warned not to trust misleading diamond grading reports and those that sell them. Suppliers must be held responsible for the quality of the diamonds they sell. The diamond trade must prioritize the protection of consumers above profits,” said Rapaport.
View the “Honest Grading” editorial, a video and a trade summary, share the article and weigh in. Comments may also be emailed to honestgrading@diamonds.net.
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RETAIL & WHOLESALE
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Christie's Jewels Sale Tops $150M
Christie's Geneva achieved the highest total for a magnificent jewels sale at $150,216,738, which was 89% sold by lot. The top lot of the evening was The Blue Belle of Asia, a cushion-shaped Ceylon sapphire of 392.52 carats, mounted on a diamond necklace, which set a new world auction record for any sapphire at $17,295,796.
Laurence Graff purchased the second top lot of the sale, a pair of pear-shaped fancy vivid blue SI2 and fancy vivid pink VS2 diamond ear pendants, which sold for $15,820,731.
A piece of jewelry by JAR was sold for over $3.5 million, against a presale high estimate of only $310,000, establishing the second highest price for a creation by the artist. Christie's luxury group chairman, François Curiel, concluded that there is a lot of cash available globally right now and very few masterpieces.
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Sotheby's Jewels Sale Tops $95M
Sotheby's Geneva sale of magnificent jewels achieved $95,272,767 and was 90.2% sold by lot. The sale resulted in strong prices for colored stones, confirming the overall health of the market. The top lot was purchased by Laurence Graff, an 8.62-carat cushion-shaped Burmese ruby that sold for $8.6 million, setting a record price for a ruby and an auction record price per carat.
An exceptional step-cut Kashmir sapphire and diamond ring of 27.54 carats sent a record at $5,984,474. The second top lot was a highly important pair of oval diamond earrings, 20.05-carat and 20.06-carat, both D, flawless, excellent polish and symmetry, type IIa and sold for $7,147,112, or $178,188 per carat.
A rare fancy intense blue diamond ring of 3.16 carats also sold to Graff for $3,194,141, or $1,010,804 per carat.
Exceptional prices were achieved for natural pearls.
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Patek Philippe Masterpiece Sets Auction Record
Sotheby's Geneva sold The Henry Graves Supercomplication timepiece for a record $24 million, far surpassing an $11 million presale estimate. Five bidders competed for the pocket watch during a 15 minute bidding war. The timepiece took five years to complete by Patek Philippe and master craftsmen in 1932 and it earned that status as the most complicated watch ever made by hand. Sotheby's sale of important watches achieved a total of $32,618,159.
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Richemont's Profit Drops
Richemont reported that revenue rose 2% year on year to $6.75 billion (EUR 5.43 billion) for the six months that ended on September 30. The luxury group's gross margin rose one percentage point to 65%. Still, profit fell 23% to $1.13 billion.
By region, and at actual exchange rates, revenue improved 6% year on year in Europe to $2.65 billion, while sales dropped 2% in the Asia Pacific to $2.59 billion. Across the Americas, sales increased 10% to $1.1 billion but in Japan, revenue plunged 13% to $448 million.
Jewelry brand boutiques recorded a sales increase of 1% to $3.34 billion; however, operating profit for the sector slipped 1% to $1.2 billion.
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Berkshire's Retail Sales Rise
Berkshire Hathaway reported that revenue from its retail division increased by 5% year on year (or $48 million), in the third quarter that ended on September 30. The division, which includes Ben Bridge Jeweler, Borsheims Fine Jewelry and Helzberg Diamonds, as well as home furnishings businesses and See’s Candies among others, had pre-tax earnings that were unchanged. Company CEO Warren Buffett singled out Borsheims as a profitable, one store operation that moves a large volume of items, while operating at 15 to 20 percentage points below competitors.
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Pandora's Profit Jumps
Pandora Jewelry's revenue jumped 26.2% year on year to $475 million (DKK 2.845 billion) in the third quarter that ended on September 30. Sales by unit volume rose 15.7% and the average price per transaction increased 9% to $24.20. Profit improved 18.5% to $121 million.
By regional market, sales in local currency increased 13.9% in the U.S., while surging 28.4% across other "Americas." Revenue from the U.K. jumped 26.4%, while Europe's sales surged 34.3%; however, Germany's growth was only 2.1%. Sales in Australia improved 15.6%, while revenue skyrocketed 69.3%t across other regions of the Asia Pacific.
Revenue from Pandora's charms improved 22% year on year to $298 million, while silver and gold charm bracelets jumped 27.6% to $65 million and ring sales surged 97.7% to $57 million. The sale of other jewelry rose 4.5% to $54 million.
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Tara Jewels' Profit Declines
Tara Jewels Ltd. reported that sales, excluding bullion, rose 7.4% year on year to $62.6 million (INR 38.5 billion) in the second quarter that ended on September 30. Net profit slipped 3.6% to $1.72 million. The company observed a revival for jewelry out of the U.S. and Europe, and it concluded that so far the wedding and festive season in India are showing strong results, which will be reflected in the current quarter's financial report.
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Shrenuj's Profit Increases
Shrenuj & Company Ltd. reported that revenue jumped 21% year on year to $426.2 million (INR 26.2 billion) for the first half of the fiscal year that ended on September 30. Profit improved 14% to $7.8 million. The company stated that revenue increased 9.7% in the second quarter to $207.5 million and profit rose 10% to $4.4 million.
Demand for diamond and jewelry was subdued, except during September for the U.S. and Europe, according to the company. A decline in gold prices and marginal improvement in the prices of the polished diamonds helped to ease pressure on margins as well. The prices for rough diamonds remained stable, but significantly higher than one year ago, and Shrenuj determined there has been just a little resistance to higher prices on the consumer side of the pipeline.
Private labels and Forevermark diamonds command a premium price and are continuing to experience sales growth in the double-digits. Still, Shrenuj observed that large format retailers ad chain-stores remain bullish on ordering for the Christmas and wedding seasons, while independent retailers are maintaining a cautious approach. The demand in India and China remains strong.
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Tips to Manage Robbery Risks
Jewelers Mutual Insurance and the Jewelers Security Alliance reminded members of the trade that crime can happen to any jewelry business, following the armed robbery of a New York Diamond District firm this week. Authorities continue to search for two suspects, one who was dressed in business attire and sported a goatee, while an accomplice wore a red cap and blue zip-up hoodie.
The groups stated that when your area is on lock down, which was the case on 47th Street Tuesday, bolt doors, close blinds and curtains, and lock up merchandise until law enforcement provide an all-clear. Monitor exterior cameras and confirm identities of everyone before allowing them entry. If you are the victim, cooperate with the criminals' demands, don't make sudden movements, comply with the robber's instructions and move in a deliberate and methodical manner. Focus on keeping employees and customers safe, for merchandise and business assets are simple to replace.
Specific to delivery risks, have a door or wall slot for the delivery of letters and small parcels and ask delivery personnel to leave larger items within the vestibule entry. Become familiar with the names and appearances of delivery personnel, learn to identify uniforms, trades people and other service providers. When an unfamiliar service employee visits, request an I.D. and a phone number and use the Internet to confirm the individual's legitimacy. Avoid admitting a visitor when you are alone and do not admit a stranger before or after regular business hours.
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Target Younger Adults for Jewelry Sales
The National Retail Federation (NRF) determined that 24% of U.S. consumers who buy gifts for the Christmas season intend to purchase jewelry or a precious metal accessory this year, according to Prosper Insights & Analytics on behalf of the retail group. The figure was slightly higher than jewelry gift intentions in 2013, but it matched the percentage of consumers who wish to receive jewelry.
In addition, 20.1% of consumers who earn under $50,000 intend to purchase jewelry, while 27.4% of those earning more than $50,000 expect to make a jewelry or precious metal purchase. Jewelers can expect that those most likely to purchase jewelry are between 18 and 24 years of age, with 34% acknowledging their intention to buy this year. As for others, 28.7% of those 25 to 34 intend to buy jewelry, 24.5% of those 35 to 44 and 22.9% of those 45 to 54 expressed their intention to make a jewelry purchase for a gift. Only 19.5% of those who were between 55 and 64 and 16.6% of those older than 65 intend to buy jewelry. Nearly 46% have not yet begun Christmas shopping and the NRF concluded that these procrastinators are simply holding out for bargain-basement deals.
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James Allen Partners With Sears
James Allen is partnering with Sears to provide an exclusive shop-in-shop experience at 16 Sears locations throughout New York, Maryland and Puerto Rico. The James Allen boutiques are located within Sears’ jewelry departments, with each being staffed by a select team of engagement ring specialists, according to the retailers. The James Allen boutique will offer 120 styles in addition to thousands of items online.
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Many Brands Have Room to Improve Online
L2 ThinkTank tested the digital competence of 82 specialty retailers, including some jewelers, to diagnose the brands' strengths and weaknesses online. The group developed a proprietary brand scoring system and categorized each retailer on five levels: "genius," meaning a retailer competitively differentiated itself and reached consumers on a variety of devices; "gifted" assured that the digital presence was consistent with the brand's image and marketing efforts; "average" translated into just functional and predictable efforts; "challenged" lacked consistent adoption of mobile and multi-channel platforms, and "feeble" defined retailers whose investment online is missing great opportunities.
In reviewing brands that sell jewelry and/or watches in any capacity no company managed to reach the level of "genius;" however, Ralph Lauren, Coach and Forever 21 scored solidly in the "gifted" category, while Michael Kors, Zales, Steve Madden, Tory Burch and Kate Spade were a few points behind, but still positioned well.
Those retailers that scored "average," and have room to improve their digital presence, included Ann Taylor, White House | Black Market, Loft, Kay Jewelers, Tiffany & Co., Allen Edmonds, Swatch Group, Fossil, Alex and Ani, Swarovski and BCBGMaxazria.
Meanwhile, "challenged" retailers on the list included Club Monaco, Tourneau, Cartier, Desigual, C wonder and French Connection. Finally, L2 named only two "feeble" brands, suggesting they both have much work to do -- Waterford and Baccarat.
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PDE Appoints Vice President
The Panama Diamond Exchange (PDE) appointed Judy Meana as the vice president. Meana previously served as PDE's director of communications, but will now be responsible for all strategic marketing and communications and operations.
Prior to joining PDE, Meana was the Panamanian communication manager of the multinational electric company Union Fenosa. She also served as Panama's government spokesperson during two presidential terms.
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MINING
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Lucara's Profit Soars
Lucara Diamond Corp. reported that revenue jumped to $91.3 million during the third quarter, compared with $42.1 million a year earlier. Profit soared to $41.9 million from $15 million in the third quarter of 2013.
Production at the Karowe mine declined 7% to 106,162 carats, although the company stated that its ore recovery was better than expected and that it achieved a higher average grade of 20.80 carats per hundred tonnes (cpht), compared with 17.6 cpht a year earlier.
The company held one large stone tender during the period, which generated $46.1 million, or $27,555 per carat, helping lift the overall average price achieved. Lucara reported that the average price of goods sold rose 44% to $791 per carat.
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Dominion Diamond Posts Surety Bonds
Dominion Diamond Corp. posted surety bonds with the Northwest Territories in the aggregate amount of $221 million (CAD 253,473,000) to secure its obligation under a water license to reclaim the Ekati mine site. As a result, Dominion Diamond has been returned letters of credit in the amount of approximately $72 million leveraged as security. Letters of credit in the amount of $37 million remain with the government as security for reclamation and related activities at the Ekati diamond mine, pending completion of additional governmental reviews under the mine's environmental agreement.
In addition, Dominion Diamond filed the developer's assessment report with the Mackenzie Valley Environmental Impact Review Board for its Jay kimberlite pipe at the Ekati mine. The Jay project holds the potential to extend the life of Ekati by nearly 10 years to approximately 2030. The assessment report is the next step in the permitting process to develop, what Dominion Diamond determined to be, the largest diamondiferous resource in North America.
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PureDiamonds Secures Funds for Monastery
PureDiamonds Resources, a subsidiary of Thabex Ltd., entered into a $32 million equity subscription facility with Lambert Private Equity LLC. The three-year long agreement and fund drawdowns are subject to receipt of regulatory approvals.
Proceeds from each drawdown will be used for general corporate and working capital purposes and may be used to develop the Monastery kimberlite project into a fully-fledged diamond mine evaluate and to pursue strategic acquisitions, according to the agreement.
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ECONWATCH
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Diamond Industry Stock Report
U.S. shares mixed but Walmart's (+7%) performance was the best in years, hitting a 52-week high, while JCP (-5%) and Charles & Colvard (-6%) pulled down the average. Far East shares higher except for Sarine (-5%). Europe all ahead, India mostly higher except for Goenka (-12%), Classic Diamond (-5%) and Vaibhav (-9%). Mining firms mainly higher, led by ALROSA (+12%), Peregrine (+17%) and Petra (+12%). View the extended stock report.
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Nov. 13 |
Nov. 6 |
Chng. |
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| $1 = Euro |
0.802 |
0.808 |
-0.006 |
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| $1 = Rupee |
61.55 |
61.51 |
0.0 |
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| $1 = Israel Shekel |
3.81 |
3.81 |
0.00 |
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| $1 = Rand |
11.21 |
11.26 |
-0.05 |
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| $1 = Canadian Dollar |
1.14 |
1.15 |
-0.01 |
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| Precious Metals |
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| Gold |
$1,160.70 |
$1,141.80 |
$18.90 |
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| Platinum |
$1,188.00 |
$1,190.00 |
-$2.00 |
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| Stock Indexes |
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Chng. |
| BSE |
27,940.64 |
27,915.88 |
24.76 |
0.1% |
| Dow Jones |
17,652.79 |
17,554.47 |
98.32 |
0.6% |
| FTSE |
6,635.45 |
6,551.15 |
84.30 |
1.3% |
| Hang Seng |
24,019.94 |
23,649.31 |
370.63 |
1.6% |
| S&P 500 |
2,039.33 |
2,031.21 |
8.12 |
0.4% |
| Yahoo! Jewelry |
1,190.56 |
1,175.95 |
14.61 |
1.2% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Trading resumes after the Diwali break and local activity is focused on preparing for the marriage season demand. The market remains price sensitive as liquidity is tight. Read the full report.
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