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Rapaport TradeWire January 9, 2015
Jan 8, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Jan. 9, 2015
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Diamond markets dominated by uncertainty. Rapaport observes very strong holiday demand at Tiffany New York store while other luxury brands weak. Electronics looking better than diamonds as mining companies failed to invest profits in generic advertising. Rough prices expected to soften in January as cutters’ profits squeezed. Better to trade polished than manufacture rough. Signet Jewelers reports Nov./Dec. same store sales +3.6%, total sales of $1.9B. U.S. Nov./Dec. online retail sales +15% to $53.3B. U.S. Nov. polished imports flat at $1.9B, polished exports +2% to $1.6B. Israel’s 2014 polished exports +1% to $6.3B, rough imports +1% to $4B.
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RapNet Data: Jan. 8
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| Diamonds |
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1,559,750 |
| Value |
$7,695,217,525 |
| Carats |
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1,441,098 |
| Average Discount |
-28.36% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
Millennials are spending more money than ever on tech and travel. A diamond may be forever, but in a generation that values impermanence, the one-time slogan of the century is looking more and more like an outdated mantra.
Beejoli Shah | Writer and Daughter of a Jeweler
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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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RAPI Index -1% for Polished Diamonds
Diamond demand from China softened in December as economic growth slowed and retailers still held large inventory of 0.30-carat diamonds. Global diamond markets were unstable due to an imbalance between rough and polished prices. Rough prices remained relatively stable at the De Beers December sight, while sightholders rejected an estimated 20% of their allocated supply. Rough trading was slow and prices on the secondary market softened, even though most boxes were offered at a loss and on generous credit terms.
Market conditions are expected to remain cautious in January as retailers assess their inventory levels following the Christmas shopping season.
In December, the RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds fell 1.1%. RAPI for 0.30-carat diamonds dropped 3.5%, while RAPI for 0.50-carat diamonds declined 1.8%. RAPI for 3-carat diamonds fell 2% during the month.
For the year 2014, RAPI for 1-carat laboratory-graded diamonds fell 8.7%. RAPI for 0.30-carat diamonds declined 6.5%, while RAPI for 0.50-carat diamonds increased 0.1%. RAPI for 3-carat diamonds dropped 6.6%.
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RETAIL & WHOLESALE
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Signet's Christmas Comps +4%
Signet Jewelers reported that same-store sales rose 3.6% year on year during the Christmas season, which spanned eight weeks that ended on December 27. Total sales grew 45% to $1.85 billion due, primarily, to the company’s acquisition of Zale earlier in the year.
Growth was driven by strong performance in the U.K., where comparable-store sales jumped 9.7%, while total sales rose 6% to $215.1 million.
At Signet’s U.S.-based Sterling division, same-store sales increase 2.5% and total sales rose 4% to $1.12 billion. Same-store sales at the Zale division grew 3.5% as total sales amounted to $521 million. One year ago, Zale reported that Christmas-season revenue fell 1.9% year on year to $556 million, which included the months of November and December.
Signet noted the success of its own omnichannel strategy during the season, claiming that ecommerce sales jumped 90.9%, or 20% without Zale. As a percent of total holiday sales, ecommerce increased 160 basis points, the company reported.
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U.S. Ecommerce Spending +15%
U.S. online retail sales for the Christmas season, from November 1 to December 31, rose 15% year on year to $53.3 billion, according to comScore Inc. Cyber Monday, December 1, ranked as the heaviest online spending day of the year with more than $2 billion in transactions made from desktops, the company stated. December 2 ranked as the second highest spending day of the season at $1.796 billion, followed by Green Monday (December 8) with $1.615 billion and Black Friday (November 28) with $1.505 billion.
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Waldman Files Chpt. 11 Reorg Plan
Alexander M. Waldman Diamond Co. Inc. filed a reorganization plan, which has been conditionally approved as part of its effort to emerge from Chapter 11 bankruptcy. The company filed for protection in May 2014 to fend off Bank Leumi from shutting down its operations. Since that time, Waldman has continued to operate, implemented cost-cutting measures and paid down its debt to Leumi to about $4.7 million from $13 million. The bankruptcy exit plan targets paying off Leumi by October, along with applicable fees and interest, in order to successfully emerge from Chapter 11. It also proposes paying off vendor claims of $600,000 over a span of eight quarters from November 2015 to 2017.
Adam D. Stein-Sapir, a portfolio manager at Pioneer Funding Group LLC, which specializes in bankruptcies, noted that the exit plan's treatment of vendor claims is aggressive. "The Waldmans are retaining their equity, while leaving vendor claims impaired and it remains to be seen whether creditors will vote in favor of that treatment. However, it may be their best option as a liquidation would likely leave them with nothing."
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Target the Future When Marketing Diamonds
The future is bright for the diamond industry -- if players position themselves accordingly, Philippe Mellier, the CEO of De Beers, told Forevermark partners in Manhattan on January 7. Mellier stated that U.S. Christmas retail sales for the jewelry sector rose by low-single-digit percentages, with 74% of Forevermark shops either flat or slightly up from 2013. Nonetheless, Forevermark branded diamonds carry higher margins.
Insiders who spoke with Rapaport News generally agreed with the growth estimates, defining Christmas as "ok" given broad-based sales increases of up to 3% at independent retailers. But the consumer market continues to shift their attitudes about diamonds, in comparison to other discretionary products, while the industry's share of advertising voice continues to decline.
Mellier added that Millennials, "the oxygen of future U.S." diamond sales, seek uniqueness and ethical reassurance from products they buy. "It is vital that we develop programs that both excite and build trust in diamonds if we are to engage the consumers of the future." Since Forevermark assists its partners with meeting marketing and growth challenges, he said that Forevermark Jewellers consistently achieve 10% to 15% premiums above generic diamond jewelry. "When you are in the business of marketing forever, you need to think long term," he said.
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Misahara Opens in New York
Lepa Galeb-Roskopp opened the Misahara jewelry boutique at The Shops at The Plaza Hotel in New York City with 440 square feet of retail space and décor that embodies her avant-garde aesthetic. The handcrafted jewelry line is influenced by Roskopp's Slavic roots as well as nature's elements, such as the Adriatic Sea, and street-fashion from New York, Paris, South Africa, Montenegro, Dubai, St. Tropez and other luxury capitals of the world.
The boutique introduces new products from the brand, including a men's cufflink collection in six styles: F-1, Adriatic, Sahara, Crown and Red Star cufflinks.
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Pandora Assumes 78 Leases in Germany
Pandora entered into an agreement with DHG Gmph to assume commercial leases on up to 78 locations in Germany as part of the jewelry brand's strategic expansion plans for concept stores. Pandora stated that it would pay a service fee to DHG for making the leases available, but the final amount is dependent on the number of leases.
The total investment for new owned and operated stores, including relocation of stores, costs related to temporarily inactive stores in the transition, service fees to DHG as well as all other costs is expected to be around $60 million (EUR 50 million). Most of the figure will be booked as capital expenses, and the impact on revenue and earnings before interest, taxes and amortization is expected to be limited due to the gradual roll out, according to the company.
Pandora recorded revenue of $60 million (DKK 372 million) in Germany during the first three quarters of 2014, representing an 8.1% increase compared with 2013. Pandora currently owns and operates 61 of 83 concept stores in Germany.
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GJEPC Promotes 'Make in India' Plan
The Gem & Jewellery Export Promotion Council (GJEPC) of India drafted a three-year plan that taps the "Make in India" program to boost exports. In the first year, the GJEPC would strive to implement the much-awaited turnover taxation system and a Special Notified Zone in Bharat Diamond Bourse to facilitate rough diamond trading on a consignment basis.
Additionally, the GJEPC will champion India as a global diamond trading hub by further developing hard skills and talent, while working with the government to commission exploration programs and surveys to determine the availability of rough gemstones in the country. The government may spearhead initiatives to legalize current mining activity through licensing and develop a regulatory framework for new mining and exploration projects.
GJEPC’s short term goals also include a hike in drawback rates for gold and silver; abolishing the import duty on cut and polished colored gemstones; adding the gem and jewelry sector to the Interest Subvention Scheme and separating ITC HS Codes for man-made diamonds.
For the upcoming three years, GJEPC plans to secure more direct procurement of rough diamonds and colored stones; ascertain the availability of rough diamonds and colored gemstones in India; create a convention center in Mumbai; promote ties with jewelry centers such as Italy and Turkey and
tap other potential markets for gems and jewelry products.
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Royal Asscher Partners With Treliss Worldwide
Royal Asscher has partnered with Treliss Worldwide/CJ Exporters, enabling the diamond brand to combined efficient sourcing, manufacturing and operations with innovation, passion and integrity. The multigenerational companies share the vision of building exciting, new and innovative diamond products that celebrate love and life.
Edward Asscher, said, “We strongly believe that the future of the diamond and jewelry industry is in branding. Royal Asscher will bring 161 years of diamond heritage and royalty to the consumer which is unique and unprecedented.”
Nirav K. Mehta, of Treliss, said, “Treliss stands for tradition, excellence, leadership, innovation, standards and service. Treliss Worldwide/CJ Exporters has over 40 years of sourcing, polishing and manufacturing expertise. Through our vertically integrated global platform we bring sustainability and quality craftsmanship to the Royal Asscher brand.”
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MINING
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Rockwell Adds Diamond Assets
Rockwell Diamonds Inc. entered into a conditional agreement to acquire alluvial diamond properties and associated equipment from Bondeo 140 CC and its affiliates for $28.5 million (ZAR 284.2 million). The assets are contiguous to Rockwell's existing properties in the Middle Orange River region and will significantly enlarge its operating and resource base. The purchase is subject to regulatory approval.
The company stated that $12 million will be paid for the mineral rights and three fit-for-purpose processing plants, while $16.5 million will be allocated for an earthmoving fleet and other associated equipment. Rockwell engaged Dundee Capital Markets to assist with its expected financing for part of the purchase price payable by Rockwell pursuant to the transaction.
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Stellar Delays Baoulé Tender
Stellar Diamonds delayed its first sale of diamonds recovered from its Baoulé project in Guinea to later this month. It will send a parcel of approximately 1,250 carats of Baoulé rough diamonds to be sold together with diamonds previously sent to Antwerp in order to maximize revenue from the project. Earlier, Stellar shipped 941 carats from Baoulé and 3,700 carats of rough from the company’s other diamond projects to Antwerp.
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True North to Update Project Report
True North Gems Inc. engaged TetraTech EBA of Vancouver, Canada to update the pre-feasibility study for its Aappaluttoq ruby and pink sapphire project in southwest Greenland. TetraTech is expected to release a revised technical report during the first quarter of 2015. True North's existing pre-feasibility study dates back to 2011, but since that time, the company prepared additional engineering and market analysis studies.
True North anticipates that the new pre-feasibility report will incorporate an updated mine plan, schedule, permit requirements and civil and flow-sheet engineering, along with a new economic assessment with a complete market analysis of ruby and sapphire demand across the luxury goods sector.
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STATS
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Israel
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2014 $Mil. |
%Chng. |
| Polished exports |
$6,270 |
1% |
| Polished imports |
$4,510 |
5% |
| Net exports |
$1,760 |
-9% |
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| Rough imports |
$4,020 |
1% |
| Rough exports |
$3,060 |
4% |
| Net imports |
$960 |
-9% |
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| Net diamond account |
$800 |
-9% |
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U.S.A.
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Nov. $Mil. |
%Chng. |
YTD $Mil. |
%Chng. |
| Polished imports |
$1,900 |
0% |
$22,186 |
5% |
| Polished exports |
$1,621 |
2% |
$19,544 |
10% |
| Net imports |
$279 |
-8% |
$2,642 |
-21% |
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| Rough imports |
$23 |
-69% |
$525 |
12% |
| Rough exports |
$8 |
-67% |
$345 |
29% |
| Net imports |
$15 |
-69% |
$180 |
-11% |
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| Net diamond account |
$294 |
-16% |
$2,822 |
-20% |
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ECONWATCH
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Diamond Industry Stock Report
As major retailers began releasing Christmas sales comps, only JCP (+23%) was a real crowd pleaser by reporting solid same-store sales growth. Chow Tai Fook (+6%) led gains in Hong Kong; Europe was basically flat but LVMH (-2%) was lower. Indian shares were mixed but C.Mahendra (+20%) led gains and miners shares were mixed, pulled down by Peregrine (-11%). View the detailed industry stock report.
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Jan. 8 |
Dec. 31 |
Chng. |
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| $1 = Euro |
0.848 |
0.827 |
0.021 |
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| $1 = Rupee |
62.47 |
63.21 |
-0.7 |
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| $1 = Israel Shekel |
3.95 |
3.90 |
0.05 |
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| $1 = Rand |
11.59 |
11.57 |
0.02 |
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| $1 = Canadian Dollar |
1.18 |
1.17 |
0.01 |
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| Precious Metals |
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| Gold |
$1,207.80 |
$1,181.80 |
$26.00 |
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| Platinum |
$1,213.00 |
$1,200.00 |
$13.00 |
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| Stock Indexes |
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Chng. |
| BSE |
27,274.71 |
27,499.42 |
-224.71 |
-0.8% |
| Dow Jones |
17,906.65 |
17,823.07 |
83.58 |
0.5% |
| FTSE |
6,569.96 |
6,566.09 |
3.87 |
0.1% |
| Hang Seng |
23,835.53 |
23,605.04 |
230.49 |
1.0% |
| S&P 500 |
2,062.11 |
2,058.90 |
3.21 |
0.2% |
| Yahoo! Jewelry |
1,233.04 |
1,246.34 |
-13.30 |
-1.1% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Trader sentiment remains weak and buyers are cautious due to high asking prices. Rough prices are coming under pressure in anticipation of a price correction. The liquidity crunch continues to be a headache for the industry. Read the full report.
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