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Rapaport TradeWire August 28, 2015
Aug 27, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
August 28, 2015
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Polished trading
cautious as financial markets tumble. De Beers restarts generic marketing spend
to restore U.S., China holiday sales growth, drops prices 8-10% at $250M Aug.
sight. Cutters hope cheaper rough will enable profitable 4Q season but trading
is still restrained. Signet 2Q sales +15% to $1.4B, profit +7% to 62M. Tiffany
2Q sales flat at $991M, profit -16% to 105M. Chow Sang Sang 1H sales -1% to
$1.2B, profit +39% to $94M. India’s July polished exports -18% to $1.5B, rough
imports -43% to $1.1B. Global 2014 rough production +4% to $14.5B, volume -4%
to 124.8M cts., average price +8% to $116/ct. Dominion 2Q sales -24% to $210M,
Ekati production +15% to 924,000 cts.
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RapNet Data: August 27
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| Diamonds |
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1,381,642 |
| Value |
$8,820,898,969 |
| Carats |
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1,428,033 |
| Average Discount |
-26.00% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
One can’t ignore what’s happened on the financial markets in the past few days and weeks but we also see our product doing quite well in these times.
Paul Rowley | Head of Global Sightholder Sales, De Beers
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MARKETS
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United States: Polished trading is stable amid some concern that quality goods are becoming harder to replace as manufacturing slowed in the last few months.
Belgium: While dealers slowly return from the summer break, they’re in no rush to enter the market. There’s some anticipation activity will pick up from September 1 as in previous years.
Hong Kong: Polished trading is slow, dampening expectations for the upcoming show. The local stock market plunge and the yuan depreciation have cast a pall over the region.
India: Manufacturers remain cautious despite reports that De Beers reduced its rough prices by up to 10 percent at this week’s sight. Rough demand improved slightly on news of the cuts but polished dealers aren’t yet seeing an effect on polished prices.
Israel: The mood in the Israel Diamond Exchange was muted by news of two significant local bankruptcies. More businesses are insisting on cash payments for goods, particularly from Far East.
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INDUSTRY
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Sightholders React to Price Cuts at $250M Sight
De Beers sightholders had mixed reactions to the price cuts at this week’s sight, which had an estimate value of $250 million before any additional supply was offered. The company dropped its rough diamond prices by an average of 8 percent to 10 percent, which spurred demand for additional goods during the week. Sightholders at press time were waiting to hear whether their requests would be granted.
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New Gem-A Trustees Gain Seats in Hotly Contested Election
Elections results are in for trustees at Gem A, the Gemmological Association of Great Britain, according to the Friends of Gem A Facebook page and confirmed by an association spokesperson. Voting was delayed this week reportedly due to technical issues.
Some 16 people were seeking to fill as many as nine slots on the board. New members are: Kathryn Bonanno, Justine Carmody, Paul Greer, Kerry Gregory, Alan Hart, Alan Hodgkinson, Jack Ogden, Richard Slater, and Chris Smith. Continuing as trustees are: Mary Burland, Nigel Israel, Miranda Wells. Israel is expected to continue to serve as acting chief executive officer of the group until the new board meets on a replacement for departed CEO James Riley.
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Blue Diamonds Drive Color Index Higher
The
Fancy Color Diamond Index (FCDI™) rose in the second quarter, driven mainly by
the blue diamond categories, according to the Fancy Color Research Foundation.
Fancy-color diamonds continued to show price strength amidst declines in their
white diamond counterparts.
Based
on a survey of more than 20 wholesale traders, the index revealed that the prices
of fancy-color diamonds across the pink, yellow and blue categories edged up 1%
over the April to July period. The strongest performers included 1-carat fancy
blue and 1-carat fancy vivid yellow stones, which were both up 4%.
Fancy
vivid blue diamonds in the 3- to 10-carat range jumped 4 to 6% while 8- to 10-carat
pinks, both intense and vivid, were up 5 to 6%. In most categories, the price increase
was the result of lower supply.
Price
weakness among white diamonds continued during the period, as polished
inventories accumulated across the supply chain. According to the RapNet
Diamond Index (RAPI™), 1-carat diamonds prices slid 1.6% over the same period.
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Tzoffey's First Rough Diamond Tender
Tzoffey's 1818, the Israeli-French auction house, will
hold its first exclusive African rough diamond tender from August 30 to
September 4 at the Israel Diamond Exchange complex in Ramat Gan.
The rough to be sold at the upcoming tender is from
Africa and includes a run-of-mine production, a wide variety of 5 to 10.8
caraters and rough stones larger than 10.8 carats.
Viewing
of the goods will take place between August 30 and September 3.
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Portugal Joins Kimberley Process Certification Scheme
Portugal has joined the Kimberley Process Certification Scheme (KPCS), according to the Official Journal of the European Union. Other participating EU countries include Belgium, Bulgaria, Czech Republic, Germany, Romania and the United Kingdom.
Countries that participate must pass legislation to enforce the Kimberley Process. They must also set up control systems for the import and export of rough diamonds.
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India Polished Diamond Imports Plummet
India’s polished diamond imports were nearly halved in
July, falling 42.9% year on year, according to The Gem & Jewellery Export
Promotion Council (GJEPC).
The impact of an industry slowdown was evident in the
country’s import figures. Overall gross imports of gems and jewelry were down
29.8% to $2.27 billion compared to $3.24 billion in July of last year.
Gross exports totaled $2.898 billion during the month,
a decline of just 0.94% from the $2.926 billion posted for the same period of
2014. Exports of cut and polished diamonds, however, dropped 18.3% to $1.51
billion in July 2015. In volume terms, the drop totaled 14.4%, with the country
exporting 2.80 million carats versus 3.26 million carats a year earlier.
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Surat Diamond Workers Attend Rally
Surat diamond industry workers will not report to work
and diamantaires will voluntarily refrain from buying and purchasing diamonds on
August 25, according to the Times of
India.
Instead, workers will head to Ahmedabad to attend a
rally advocating education improvements and jobs for members of the community.
The diamond industry in the city employs over 450,000 diamond workers, per the
newspaper.
Surat
Diamond Association President Dinesh Navadia was quoted as saying, “It is a
voluntary decision of the people in the diamond industry to keep their units
and offices closed on August 25. They are going to Ahmedabad to attend the
rally.”
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IDI Enables Chinese Diamond Search for September Show
The Israel Diamond Institute has introduced a Chinese-language version of its “Find Your Diamond” search platform for the Hong Kong Jewellery & Gem Fair beginning September 10, according to an IDI announcement.
The application shows all goods offered by Israeli exhibitors at the show. There is a mobile version to complement dedicated terminals at the show. The Israel Diamond Pavilion in Hong Kong will feature 98 companies, with another 20 businesses exhibiting at other locations throughout the show. The pavilion will be located in Hall 7, 9 and 11 of the Asia World Expo.
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RETAIL & WHOLESALE
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De Beers to Launch Holiday Campaign
De
Beers will make what it described as “a major investment” in marketing to boost
consumer demand in the U.S. and China during the year-end holiday season.
The
company didn’t specify the amount it would spend on the campaign, which will
run in addition to Forevermark’s “A Diamond is Forever” brand promotion. The
new campaign will target men purchasing diamond jewelry as gifts for partners
during the holiday season.
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Tiffany's to Open Store in Auckland
Tiffany & Co. says it will bring a new level of
luxury jewelry to Auckland when it opens a store there in late 2016, according
to New Zealand’s Herald newspaper.
The 430-square-meter store will occupy the entire
ground floor of the historic Australis House building, located at 36-38 Customs
Street East.
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Luxury Consigner RealReal Opens NY Valuation Office
RealReal, which provides authenticated luxury consignment sales, has opened a valuation office in New York City to provide sellers with free valuations of their fine jewelry and watches, according to a company announcement.
The midtown Manhattan office is staffed by RealReal's graduate gemologists and watch experts who assess and provide a valuation document on the spot. The company said the new concept aligns with its mission to address the gap in the market for a reliable place to get accurate fine jewelry and watch valuations.
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Chow Sang Sang’s Sales Drop
Chinese
jewelry retailer Chow Sang Sang’s sales fell in the first half, dragged down by
a 12% decline in same-store sales in Hong Kong and Macau, according to its
filing with the Hong Kong Stock Exchange.
Overall
company sales slipped 1% to $1.2 billion (HK$9.3 billion). Operating profit
from the company’s retail jewelry group fell 12% to $72.3 million (HK$561
million).
The
company said that while there may have been as much as a 5.9% year-on-year
increase in Mainland Chinese tourists’ visits to Hong Kong, “actual spending by
these visitors did not bring much cheer to the luxury retail sector.”
Ahead
of the filing, Bloomberg Intelligence analyst Catherine Lim wrote that a sales
decline could lead Chow Sang Sang to seek retail rent cuts and store closures.
The company closed its store in Metroplaza, Kwai Chung during the first half of
the year.
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Fletcher’s Parent Files for Bankruptcy Protection
USA
Discounters Ltd., the parent company of Fletcher’s Jewelers, filed for
bankruptcy protection and plans to wind down its business, according to TheWall
Street Journal.
The
company closed its 24 USA Living stores before filing and is still considering options
for its seven Fletcher’s locations, according to the report.
In
court papers, the company stated that it had discontinued credit sales as of
Monday, the date of its bankruptcy filing, and is selling jewelry for cash
only.
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WJA Plans 19-City Night Out
The
Women's Jewelry Association (WJA) will host its third annual Jewelry Night Out in
19 U.S. cities on September 10.
Activities
will be held in Atlanta; Bethesda, Maryland; Birmingham, Alabama; Boston;
Chicago; Dallas; Denver; Ft. Lauderdale, Florida; Cincinnati; Las Vegas; Los
Angeles; Madison, Wisconsin; Minneapolis; Nashville; New York City; Providence,
Rhode Island; San Diego; San Francisco and Seattle.
Jewelry
Night Out's lead sponsors are Signet Group’s Kay Jewelers and Jared The
Galleria of Jewelry. Details on location, start times and registration are
available at wjajewelrynightout.com.
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MINING
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Russia Ranks as World’s Top Diamond Producer
Global
diamond output grew 4% by value last year to $14.5 billion as the average price
per carat jumped 8% to $116.17 and Russia displaced Botswana as the world’s
largest producer, based on annual data published by the Kimberley Process
Certification Scheme (KPCS). In volume terms, global production fell by 4% to
124.778 million carats.
Russia,
which has traditionally placed second to Botswana, was the largest producer in
terms of both value and volume last year. The average price of the nation’s
total diamond crop, derived largely from ALROSA’s mining activity, surged 19%
to $97.47 per carat as its value catapulted 20% to $3.73 billion and volume
edged up 1% to 38.303 million carats.
The
average price in Botswana, where De Beers mines are the predominant producers,
slid 5% to $147.84 per carat as growth by value flat-lined at $3.65 billion.
Lesotho
produced the world’s highest-priced diamonds, with their average price
skyrocketing 69% to $990.18 per carat. In contrast, the mean price in second-place
Namibia fell 25% to $602.57 per carat.
India,
the world’s largest diamond manufacturing center, ranked as the largest
importer of rough in 2014.
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Dominion Diamond’s Sales Drop
Dominion Diamond Corp. reported that its fiscal-2016, second-quarter
diamond sales totaled $209.7 million, versus $277.3 million in the comparable
quarter of fiscal 2015. The results reflect the level of production achieved at
the Diavik and Ekati diamond mines, according to the company.
During the quarter, Ekati recovered 900,000 carats
from one million tons of the ore processed there.
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Stellar Project to Produce 1M Carats
Stellar Diamonds announced that a preliminary economic
assessment performed by Paradigm Project Management shows its Tongo kimberlite
project in Sierra Leone can produce almost 1 million carats over the next 18
years.
The Tongo project has been assessed as having an
18-year mine life, based on both surface and underground mining, for a total yield
of 955,930 carats. In the first four years, Stellar plans to produce 117,806
carats to generate early cash flow.
The company will utilize around $24.2 million to establish
the project’s initial surface and underground mining operation.
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De Beers Maintains Outlook
De
Beers maintained its flat forecast for diamond jewelry sales in 2015, despite
this week’s slump in financial markets, Paul Rowley, head of global sightholder
sales, told Rapaport News.
“One
can’t ignore what’s happened on the financial markets in the past few days and
weeks, but we also see our product doing quite well in these times,” Rowley
said. “We see diamonds in general bucking the trend a little. As much as
consumer demand won’t meet our expectations from the beginning of the year, we
still feel that it will be around flat on last year – which wasn’t a bad year.”
Rowley
also pointed out that Chinese retailers aggressively purchased polished in
response to the rapid store expansion that occurred in the first half of 2014.
“We
saw a lot of those goods going to the Gemological Institute of America (GIA)
for grading, but we subsequently didn’t see them fully turn into consumer
demand,” he explained. “The opposite has happened in 2015, as there has been a
contraction at a store level and flat growth in consumer sales. So, we have
this overhang of polished.”
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GENERAL
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U.S. Sanctions Belgian Diamond Trading Office
The U.S. Department of the Treasury’s Office of
Foreign Assets Control (OFAC) sanctioned Belgium and Central African Republic
(CAR)-based diamond companies Badica and Kardiam on August 21 for providing
support to militia leaders responsible for violence threatening the peace,
security and stability of the CAR through illicit trade.
Badica is one of the largest diamond companies in the
CAR and Kardiam is Badica’s branch in Antwerp.
In May 2013, the Kimberley Process prohibited diamond
exports from the CAR due to insurgents’ control over its diamond-mining areas.
Badica buys rough diamonds from mines that are under insurgent control and
smuggles them out of the country for exportation to Kardiam, OFAC stated.
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IDE Mulls Creating Large Diamond Factory
The Israel Diamond Exchange (IDE) is considering opening a manufacturing plant for the polishing of large diamonds, according to information posted on its website. The IDE's Industry Committee has invited members of the bourse to a discussion of the facility on September 7.
Plans calls for converting 400 square meters of currently unused space into a factory. The operation will also offer 15 workrooms for rent. The factory is in the planning stages and will connected to the bourse’s Maccabi building by an internal passageway.
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Birmingham Assay, London Diamond Bourse Partner
AnchorCert Gem Lab, part of the Assay Office
Birmingham (AOB), and the London Diamond Bourse (LDB) are joining forces to
provide bourse members with diamond and gemstone testing and reports, AOB
announced.
The joint venture will offer LDB members trading from
the Bourse floor in Hatton Garden dedicated, secure delivery of diamonds and
gemstones for grading to the lab, based at AOB’s new Birmingham facility.
London Diamond Bourse COO Victoria McKay said the
added value for bourse members is the lab’s U.K. location, which will reduce the
lead times required for gemstone analysis and grading.
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Doha Bank Imports Record Volume of Gold
Falling
gold prices continue to fuel strong buying interest in gold and Doha Bank is
building up its gold supply to satisfy this increased consumer appetite, CPI
Financial reported.
The
bank imported 23,818 ounces of gold in the first seven months of 2015 to keep
up with sustained demand from jewelry manufacturers, jewelers, retailers and
high-net-worth investors.
Doha
Bank is one of the few banks authorized to import gold in Qatar and offers gold
bars and mint coins to its customers.
The
bank has also signed a memorandum of understanding with a Swiss gold supplier
and established agreements with several major global suppliers in the physical
gold market, according to CPI Financial.
Gold
prices fell below $1,100 in July, a five-year low, and continue to hover around
that mark.
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Colombia to Host International Emerald Symposium
Colombia will host its first International Emerald
Symposium in Bogotá from October 13 to 15.
Fedesmeraldas, the Colombian Emerald Federation, will
organize the conference, which will seek to address a number of issues and
opportunities in resource management, manufacturing, certification,
nomenclature, technology, consumer education and branding.
Delegations
from the governments and private sectors of Zambia, Afghanistan and Brazil, as
well as major international trade organizations, such as the International
Colored Gemstone Association (ICA), American Gem Trade Association (AGTA) and
CIBJO, the World Jewelry Confederation, will be participating in and supporting
the event.
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ECONWATCH
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Diamond Industry Stock Report
Industry stocks followed their broader indexes down around the world this week. The biggest declines in the U.S. were Birks Group (-10%) and Sotheby's (-11%). Indian shares tracked a 5% drop in the Sensex index, led by Goenka Diamonds (-16%) and Rajesh Exports (-14%). Mining stocks losses were headed by Petra Diamonds (18%) and Shore Gold (19%). View the detailed industry stock report.
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Aug. 27 |
Aug. 20 |
Chng. |
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| $1 = Euro |
0.8851 |
0.8942 |
-0.009 |
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| $1 = Rupee |
65.875 |
65.5904 |
0.3 |
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| $1 = Israel Shekel |
3.9382 |
3.883 |
0.06 |
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| $1 = Rand |
13.0566 |
12.9394 |
0.12 |
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| $1 = Canadian Dollar |
1.3217 |
1.3132 |
0.01 |
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| Precious Metals |
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| Gold |
$1,128.63 |
$1,141.01 |
-$12.38 |
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| Platinum |
$996.20 |
$1,018.00 |
-$21.80 |
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| Silver |
$14.30 |
$15.47 |
-$1.17 |
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| Stock Indexes |
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Chng. |
| BSE |
26,251.40 |
27,607.82 |
-1,356.42 |
-4.9% |
| Dow Jones |
16,285.51 |
17,348.73 |
-1,063.22 |
-6.1% |
| FTSE |
6,119.36 |
6,373.06 |
-253.70 |
-4.0% |
| Hang Seng |
21,838.54 |
22,757.47 |
-918.93 |
-4.0% |
| S&P 500 |
1,940.51 |
2,079.61 |
-139.10 |
-6.7% |
| Yahoo! Jewelry |
978.15 |
1,005.35 |
-27.20 |
-2.7% |
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INDIA MARKET REPORT
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Polished Trading Activity
The local polished market continues to feel the slowing in both demand and manufacturing activity. Liquidity remains tight. Domestic buying has weakened as the INR has lost more than 3 percent against the USD since the beginning of the month. Read the polished diamond trading report.
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