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Rapaport TradeWire October 30, 2015
Oct 29, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
October 30, 2015
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GIA invalidates 1,042 grading reports after computer hackers
penetrate system and alter data. RapNet suspends 10 members that GIA says were
involved. Reduced Indian production before Diwali holiday (Nov. 7-13) creating
some shortages. Trading activity improving as aggressive dealers try to buy
select goods at deep discounts. Some sellers holding out and getting good
prices from buyers with firm orders. Rough under continued pressure with
reports of De Beers discounting. Sight system falling apart as 100% deferrals
allowed for Nov. Petra Diamonds 1Q production +1% to 842,796 cts., prices -9%
at Oct. sale. Sally Morrison to head marketing at Diamond Producers
Association.
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| Diamonds |
1,218,611 |
| Value |
$8,201,511,354 |
| Carats |
1,340,732 |
| Average Discount |
-29.06% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI) is the average price for the top 25 diamond qualities (D-H, IF-VS2). It is based on the 10 best priced diamonds for each quality. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
GIA strongly requests that anyone in possession of any of these diamonds or grading reports return them immediately to GIA for examination.
GIA’s announcement after an outside party gained unauthorized remote access to its grading information database and altered reports for 1,042 diamonds
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MARKETS
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United States: Steady trading with
buyers looking for opportunities. Suppliers able to sell at low profits. Dealers
filling specific orders can get good prices...
Belgium: Activity improving with
dealers filling specific orders for the holiday season. U.S. demand good,
Europe just okay, China weak...
Hong Kong: Slight improvements with
some limited inventory buying at deeply discounted prices. Most activity is for
specific orders with some stones getting good prices...
India: Polished trading improving
with U.S., Israeli and Chinese buyers looking for opportunities before Mumbai
shuts for Diwali (Nov. 7-13). Local buyers also active...
Israel: Slight improvement in
polished trading as dealers return from New York DDC week. U.S. demand is
driving the Israeli market, while Chinese demand improving...
Click here to continue reading
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INSIGHTS
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Is the Two-Stone Ring The One?
The last few
years have been a tiresome journey for the diamond industry but recent announcements
from Signet Jewelers and
De Beers signaled that the urgent call to sales by stepping up marketing activity
may have finally been heard…
Click here to continue reading
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INDUSTRY
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GIA Invalidates 1,000+ Hacked Grading Reports
The Gemological Institute of
America (GIA) invalidated grading reports for 1,042 diamonds after an outside
party gained unauthorized access to GIA’s grading information database and
altered the reports.
The alterations pertained to both color and clarity grades, and the clients who
submitted the diamonds in question have been contacted and suspended from
further submissions to GIA, pending the association’s continued investigation.
The GIA published a list of the
clients that submitted the diamonds which includes the number and issue date of
the invalidated reports, the shape and weight of each stone, and the submitting
client account. The list does not include color or clarity grades because these
may have been altered, GIA added.
The diamonds were submitted between November 2014 and September 2015;
approximately 900 were submitted in July and August, with most of the diamonds
submitted in India.
GIA said internal controls identified discrepancies, prompting it to initiate
an investigation with Tata Consultancy Services (TCS), a contractor that
supports GIA databases. The investigation indicated that one or more former TCS
employees made the unauthorized changes remotely to alter grades before the
reports were printed and sent to clients. The hackers were said to be acting at
the behest of parties unrelated to GIA or TCS.
Indian law enforcement agencies are also actively investigating the matter.
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RapNet Suspends Members Suspected of Falsifying GIA Reports
RapNet, the Rapaport Diamond Trading
Network, has suspended 10 members pending further investigation. The members
have also been suspended by the Gemological Institute of America (GIA) for
allegedly participating in a scheme that hacked into the GIA’s computer system
and upgraded 1,042 GIA grading reports. GIA issued laboratory alerts
invalidating the grading reports and naming the suspended members.
RapNet has removed all diamonds with grading
reports involved in this matter as well as all other diamonds listed by
suspended members. Additional updated information and a list of all the
diamonds and the companies that submitted them is available at http://goo.gl/TEF66F.
GIA has asked anyone in possession of the listed
diamonds or invalidated grading reports to immediately return them to GIA.
Rapaport clients may return the grading reports and diamonds to Rapaport
offices in New York, Ramat Gan, Mumbai and Hong Kong.
The names of the suspended Rapnet Members are:,
A. Lallubhai & Brothers, Admg Diamonds Pvt. Ltd, Darshna Gems, Dirgh
Diamond Pvt. Ltd., Mahima Gems, Nidhi Impex, Pansuriya Impex, Shree Yogeshwar
Gems, Sitaram Gems and Unity (HK).
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De Beers Enables 100% Deferrals
De Beers will allow sightholders to defer their entire
November allocations until December.
“Further to discussions with several of you following recent
cutting center visits, we are writing to provide an overview of some of the
additional flexibility we will be putting in place for sights 9 and 10,” the
company said in a note to sightholders, which was obtained by Rapaport News. “We understand that many
businesses' short-term demand requirements may well have seen some significant
changes, so we are looking to find the best ways to be flexible in meeting your
needs.”
Sightholders reported a somber mood at the October sight and
refused about half of their allocated supply. Diamond manufacturers have
significantly reduced their rough diamond intake and factory output in 2015 as
polished sales have declined due largely to a slowdown in China.
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WFDB Agenda Prioritizes Membership Expansion, Benefits
The World Federation of
Diamond Bourses (WFDB) will discuss a “new strategy” at its executive committee
meeting in Germany, which it said will seek to grow its membership and broaden
the benefits offered by membership. The event will be hosted by Germany’s
Diamant-und Edelsteinbörse, or diamond and gemstones exchange, in
Idar-Oberstein in the state of Rhineland-Palatinate.
Other topics on the agenda will include the World
Diamond Mark (WDM), which will be the subject of an address by WDM chairman
Alex Popov.
Members will also discuss forging closer ties with
trade bodies in the major diamond centers, producers, and
laboratories, WFDB president Ernie Blom said.
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JFC Announces ‘Facets of Hope’ Honorees
Jewelers for Children (JFC) will honor Stuart Lee of Signet Jewelers
and Dennis Ulrich of the Richline Group at its annual Facets of Hope event, set
for June 2016.
Both Lee, Signet’s executive vice president of
merchandising, and Ulrich, Richline’s CEO and chairman of JFC, have agreed to
serve as guests of honor, with the responsibility of assisting in the group’s
fundraising efforts. The proceeds benefit children who are the victims of
catastrophic illness or life-threatening abuse and neglect.
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Slack Demand Leads to Earlier Diwali Closings
Indian diamantaires will close a week early for
Diwali this year as they expect a subdued holiday season, The Times of India reported.
Work will stop by the end of October, even
though the official 20-day vacation does not begin until November 5, with Diwali
to be celebrated on November 11 this year. Most business owners are
contemplating reopening in the first week of December, a Diamond Trading
Company sightholder was quoted as saying in the report.
A fall in demand for polished stones has
negatively impacted the Indian industry as the Chinese economy has slowed down.
Around 300 smaller diamond units have closed permanently in recent months,
cutting output capacity by 60% and rendering more than 20,000 workers
redundant.
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Laurelton-Reign Factory to Reopen After Tiffany Exit
A Namibian diamond cutting and polishing company
that supplied Tiffany & Co. will reopen after shutting down earlier this
year, but without Tiffany’s involvement, The
Namibian reported, citing the country’s Diamond Commissioner, Kennedy
Hamutenya.
Laurelton-Reign Diamonds, which operated as a
joint venture between Tiffany subsidiary Laurelton Diamonds and Namibia’s Reign
Investment, closed in August after the U.S. retailer pulled out because the
supply of stones was not adequate and not the right type, the newspaper quoted
Hamutenya as saying.
Reign is in the process of acquiring the
company’s factory in Windhoek and is looking for new investors to enable it to
operate again in the near future, Hamutenya added.
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RETAIL & WHOLESALE
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Rio Tinto, Pure Gold to Offer Diamond Jewelry in Middle East
Rio Tinto Group and retailer Pure Gold Jewellers struck an
exclusive partnership to sell diamond jewelry in the Middle East,
targeting the region’s lucrative wedding-gift market.
The British miner’s collection, marketed every year for the
Hindu festival, will be available in Pure Gold stores during Diwali, with prices
starting at $463 (AED 1,699) for jewelry items made from natural diamonds and
hallmarked, 18-karat gold.
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Worthy Raises $8M for Diamond, Colored Gem Expansion
Worthy, an online auction site for pre-owned diamonds and
jewelry, raised $8 million to buy diamond and colored stone jewelry, as well as
vintage watches, from consumers. The two-year-old New York City e-commerce
startup, which also operates an R&D facility in Israel, previously raised
more than $8.5 million.
Worthy brokers items from consumers, then insures the goods
and pays to ship and authenticate them. Once the items have been inspected,
they are typically placed on the e-commerce site within five days. Worthy then
auctions them to mostly antique dealers and retail jewelers, paying the
original owners via check, wire transfer or PayPal, and taking a cut of between
5% and 20%, depending on the price of the item.
Ben De-Kalo, Worthy’s founder and CEO, said that since the
world’s diamond mines are going to be exhausted in about 50 years, business
opportunities will abound in recycling already-mined diamonds, including the $1
trillion worth of polished stones estimated to be held in U.S. households.
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India’s Flipkart, Malabar Partner
Indian e-commerce giant Flipkart partnered with Malabar Gold
and Diamonds on its inaugural online marketplace, just ahead of the Diwali
festival.
The site lists more than 1,300 designs of gold, diamond and platinum
jewelry.
Flipkart delivers 5 million shipments monthly—books,
electronics, makeup and clothing—to 18 million registered users in 150 cities,
and its cash-on-delivery model made e-commerce more viable in India, according
to Bloomberg News.
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Black Friday to be Top U.S. Shopping Day
Black Friday is expected to be the busiest shopping
day of the year, using both customer visits and sales dollars as indicators,
according to retail analytics provider ShopperTrak.
November 27, the day after Thanksgiving Day this
year in the U.S., is the day on which retailers traditionally offer promotions.
The second-busiest day by both measures will be Super Saturday, which falls on December
19 this year, the last Saturday before Christmas.
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Bulgari Strength Fueling Jewelry’s Growing Dominance Over Watches at LVMH
The
strength of the Bulgari brand against the “repositioning” TAG Heuer label is
largely responsible for the widening gap between LVMH Moët Hennessy Louis
Vuitton’s sales figures for jewelry and watches, according to Chris Hollis,
LVMH's director of financial communications.
“Although when you look at this gap, it's a
little bit artificial as you compare watches for Bulgari, which are benefiting
from the strengths of the brand, but also watches from TAG Heuer, which is in a
sort of repositioning phase," Hollis said in the group’s third-quarter results conference call October 13.
Meanwhile, LVMH has appointed McKinsey & Company’s Anish Melwani as
chairman and chief executive officer of LVMH Inc. from January 4, responsible
for activities in North America, LVMH said in a statement October
27. Pauline Brown will
step down as North America chairman at the end of 2015, it statement said October 27.
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Signet Calls for Tax Equality for Brick-and-Mortar Jewelry Retailers
Signet Jewelers has called for
measures to remove a perceived unfairness in the tax system that it said imposes
a financial disadvantage on traditional retailers in the U.S., versus their
online counterparts.
The U.S.-based jeweler’s comments, posted on
Cleveland.com, came amid discussions over the introduction of the Marketplace
Fairness Act of 2015 in the Congress. The act, which has yet to be passed, aims
to “restore States' sovereign rights to enforce State and local sales and use
tax laws.”
Currently, online sellers such as Amazon and
eBay can avoid charging and collecting sales tax in states where they do not
have a warehouse or another physical presence, which, according to
Cleveland.com, gives them a 7% to 8% price advantage.
Under current tax laws, brick-and-mortar stores
are required to charge and collect sales taxes, but the same does not apply to
online sellers, James Alperin, an Ohio jeweler, said in an interview with the site.
The Ohio General Assembly is prepared to pass the legislation once Congress
does.
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$3.1M Fancy Pink Diamond Ring Up for Auction in HK
A 12.31-carat, VVS1 pear-shaped fancy light pink
diamond and diamond ring valued at an estimated $3.1 million (HKD 24 million) will
be offered at a tender to be held by Hong Kong auction house Luxeford on
November 10 at the country’s Conrad Hotel.
The stone is exceptionally chemically pure and
flanked by pear-shaped diamond shoulders weighing 1.26 and 1.2 carats and an
openwork gallery embellished with pavé-set, brilliant-cut diamonds of pink hue,
Luxeford stated.
A public exhibition of this and other lots will
be held at the Conrad Hotel from November 7 to 10.
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Marco Bicego Rolls Out E-Commerce Site
Jewelry
brand Marco Bicego launched an e-commerce site that enables visitors to browse
its 11 core collections and its Unico line online, National Jeweler reported.
Consumers can view online merchandise by
category, collection, technique and style, as well as access updates about the
brand and events.
Marco Bicego is set to unveil its latest
collection, Luce, this December exclusively on the new site, according to
National Jeweler. The line will feature a range of silhouettes crafted in thin,
irregularly shaped 18-karat yellow-gold hand-engraved strands, some of which are
piece-set with diamonds. Retail prices will range from $1,500 to $4,000.
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J.C. Penney Lays off 300
J.C. Penney Company laid off
300 staffers at its headquarters in Plano, Texas, citing a need to simplify the
business and increase productivity, The
Dallas Morning News reported.
The move, which follows the appointment of
Marvin Ellison as CEO on August 1, affects just under 10% of the company’s
3,400 employees. Since taking the helm, Ellison
has been reviewing the business with the aim of identifying areas for cost
reduction, the report said.
It was “essential that our
operations align with the strategic priorities of the company,” J.C. Penney
spokeswoman Dapne Avila said in The
Dallas Morning News.“Over
the last several months, the company has been evaluating its home office
structure to identify opportunities for greater simplification and higher
productivity.”
J.C. Penney aims to achieve roughly $2 billion in incremental sales by
2017, resulting in mid-single-digit sales growth during the period, it said in
a statement posted on its website last October.
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MINING
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Petra Diamonds Reports Zero Revenue
Petra Diamonds reported that it generated no
revenue during its first fiscal quarter that ended on September 30, though its production
rose 1% year on year to 842,796 carats, moving the company toward its goal of producing
more than 3.3 million carats in fiscal 2016.
“The diamond market continues to be impacted by
excess polished inventory in the pipeline, a slowdown in demand, particularly
from China, as well as financing and profitability issues in the midstream,”
Petra explained in its trading update.
Petra didn’t hold any tender sales during the
quarter. Consequently, its diamond inventory rose 90% to 1.18 million carats as
of September 30.
The company held its first tender of the year in
October, selling 696,801 carats for $68.9 million with 96% of the goods on
offer sold. The average price achieved was $99 per carat, which was 8.8% below
the average price garnered at Petra’s previous sales in May and June.
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GENERAL
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India’s Central Bank Plan to Cut Gold Imports
The Reserve Bank of India unveiled a set of guidelines designed
to govern the gold monetization scheme, which is expected to reduce the
approximately 900-ton total imported annually, according to information posted
on the Gem & Jewellery Export Promotion Council (GJEPC) website.
The government wants to make some part of the country’s
20,000-ton idle gold inventory, held by individuals, trusts or mutual funds,
available, as high gold imports were a contributing factor in the current
account deficit.
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Gem-A Appoints Interim CEO
The Council of the Gemmological Association of Great Britain
(Gem-A) appointed Nick Jones as interim CEO, after the post had been unoccupied
for several months.
Jones’ role as interim CEO will be to manage the trade
association and advise the governing council on the future structure of the
group. Jones is a chartered accountant who recently retired after 12 years at
the Society of Operations Engineers (SOE), having served as its CEO for the past
six years.
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South Africa Told Its Lagging Diamond Industry Needs a Boost
South
Africa needs to boost its lagging diamond industry to re-establish the
industry’s former glory, two keynote speakers said at the nation’s first
Diamond Indaba in Johannesburg.
Ernie Blom, president of the World Federation of
Diamond Bourses, called on delegates at the conference to “work together as
partners or we will all perish together as failures,” in a speech posted online
by Mining Weekly October 28.
Even though South Africa is the world’s
fifth-largest diamond producer and home to some of the diamond mining
industry’s most iconic names, the number of workers employed in the sector in
South Africa had fallen from a peak of 4,500 to 200 today, Blom said.
“We need to consider the benefits that we can
derive as a region and individual countries if we collaborate to establish SADC
as a diamond beneficiation hub," Barend Petersen, the executive
chairperson at De Beers Consolidated Mines, told delegates at the Indaba, an
African term for a conference, in a speech posted by Mining Weekly.
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ECONWATCH
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Diamond Industry Stock Report
Shares of miners saw losses this past week, led by Petra Diamonds (-16%) after the South African miner reported disappointing results. Among retailers, JC Penney (-5.5%) and Nordstrom (-4.5%) lost value. Kering (+9%) led gains in European luxury stocks after it said 3Q revenue was fueled by a "surge" of Chinese tourist shoppers in Western Europe and Japan.
View the detailed industry stock report.
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Oct. 29 (10:52 GMT) |
Oct. 22 (13:00 GMT) |
Chng. |
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| $1 = Euro |
0.91 |
0.89 |
0.024 |
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| $1 = Rupee |
65.24 |
65.10 |
0.1 |
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| $1 = Israel Shekel |
3.89 |
3.87 |
0.02 |
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| $1 = Rand |
13.77 |
13.51 |
0.27 |
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| $1 = Canadian Dollar |
1.32 |
1.31 |
0.01 |
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| Precious Metals |
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| Gold |
$1,160.15 |
$1,167.98 |
-$7.83 |
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| Platinum |
$979.50 |
$979.50 |
$0.00 |
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| Silver |
$15.96 |
$15.82 |
$0.14 |
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| Stock Indexes |
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Chng. |
| BSE |
26,838.14 |
27,287.66 |
-449.52 |
-1.6% |
| Dow Jones |
17,779.52 |
17,168.61 |
610.91 |
3.6% |
| FTSE |
6,377.83 |
6,339.07 |
38.76 |
0.6% |
| Hang Seng |
22,819.94 |
22,845.37 |
-25.43 |
-0.1% |
| S&P 500 |
2,090.35 |
2,018.94 |
71.41 |
3.5% |
| Yahoo! Jewelry |
1,048.17 |
1,018.87 |
29.30 |
2.9% |
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INDIA MARKET REPORT
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Polished Trading Activity
Polished trading improving with U.S., Israeli and Chinese buyers looking for opportunities before Mumbai shuts for Diwali (Nov. 7-13). Local buyers also active as steady gold demand (+5% in 3Q, according to GFMS survey) raises expectations for Diwali. Good demand for 0.30-1ct., D-H, VS-SI, RapSpec A2+ (3X, none) diamonds. Very limited rough buying as manufacturers maintain low polished production and some factories closing early for Diwali. GIA hacking scandal adding to uncertainty with leadership meeting set to discuss implications.
Read the Polished Diamond Trading Report
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