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Rapaport TradeWire August 18, 2016
Aug 18, 2016 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
August 18, 2016
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Diamond markets quiet and
conservative. Buyers selective and price sensitive. Dealers hoping Sept. Hong Kong show will stimulate
stronger 4Q polished trading. Chinese consumer confidence stable but Hong Kong
luxury continues to slide. Polished suppliers under pressure with rising
inventory and tight liquidity. Israel’s FIBI bank raises collateral
requirements for diamond loans. Steady demand for 1 to 2.99 ct., D-I, SI1-I2
but VS+ softening. Stars and melee weak with sluggish demand and concerns about
synthetics. Titan 1Q sales +4% to $416M, profit -16% to $19M. Gem Diamonds 1H
revenue -8% to $109M, loss of $16M vs. profit of $26M. Botswana 2Q rough
exports +16% to $980M.
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| Diamonds |
1,239,730 |
| Value |
$7,867,352,662 |
| Carats |
1,323,398 |
| Average Discount |
-30.24% |
www.rapnet.com
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| The RapNet Diamond Index (RAPI™) is the average asking price in hundred $/ct. of the 10 percent best priced diamonds, for each of the top 25 quality round diamonds (D-H, IF-VS2, GIA-graded, RapSpec-A3 and better) offered for sale on RapNet - Rapaport Diamond Trading Network. |
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
The 'diamond' engine of growth has run out of steam.
Economists Keith Jefferis and Sethunya Sejoe of Econsult on the future of Botswana's diamond trade
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MARKETS
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United
States: Slight trading improvement but polished buyers in
summer mode. Demand selective with lower prices spurring buyer
interest…
Belgium:
Market quiet with bourse services closed until
August 22…
Israel:
Very little activity with the Israel Diamond
Exchange closed for summer vacation until August 28…
India:
Slow trading and weak sentiment. Dealers preparing
for Hong Kong show. Polished inventory levels high as manufacturing continues
but demand slowed in the past few months…
Hong
Kong: Polished trading sluggish with some improvement as
dealers prepare for the September show. Smaller suppliers discounting to
maintain liquidity…
Click here for deeper analysis
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INDUSTRY
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NY Firm to Launch Diamond Industry Lending
Excelsior
Capital Ventures will start lending to diamond and jewelry companies on October
3, aiming to fill an estimated $6 billion liquidity shortfall within the trade.
The New York-based firm plans to co-lend with major banks that are already in
the diamond sector and grow its exposure to $1.5 billion by 2019. Excelsior will loan up to $20 million to each
borrower against diamond and precious-metal inventories as collateral.
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Israeli Bank Tightens Lending Terms
The Israel Diamond Exchange (IDE) pledged to contest a
decision by First International Bank of Israel (FIBI) to tighten its lending
standards for the trade. FIBI raised collateral requirements for the diamond
industry, prompting IDE president Yoram Dvash to assure bourse members his team
will lobby state authorities to persuade the bank to retreat. The IDE has set
up a committee to that effect and will hold an emergency meeting after its
members return from summer vacation.
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India’s Jewelers Applaud Simpler Tax System
India’s jewelry industry welcomed the goods and services tax
(GST) passed by parliament this month even as there remain concerns about its
implementation. GST is expected to be adopted on April 1, 2017, the start of
India’s financial year, and will consolidate several payments that are made
currently into just one charge. The
new system will free up the movement of goods, said G.V. Sreedhar, chairman of
the All India Gems & Jewellery Trade Federation.
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Blue Diamonds Buoy Fancy Color Prices
Fancy
color diamond prices edged up 0.4% in the second quarter due to a notable
increase in demand for blues and pinks, according to the Fancy Color Research
Foundation (FCRF). Blue diamond prices rose 1.1% and pinks increased 0.7%,
offsetting a 0.5% decline in fancy yellow prices. Fancy vivid blue diamond
prices jumped 8.6%.
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RETAIL & WHOLESALE
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U.S. Jewelry Store Sales Decline
U.S.
specialty jewelry store sales fell 2% to $2.2 billion in June, according to the
U.S. Census Bureau. The decline contrasts with growth in previous months as
sales increased 1% in the first half of the year. Sales have been buoyed
by higher prices as the U.S. consumer price index (CPI) for jewelry rose 4% in
July from a year earlier, according to the Bureau of Labor Statistics. The
index was little changed compared to June, while the CPI for watches rose 2%
sequentially.
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Macy's Shutting 100 Stores
Macy’s
will close 100 of its 728 stores in early 2017 to focus on better-performing
outlets and strengthen its digital business. While the stores slated for
closure generate $1 billion in annual sales, their profitability declined in
recent years and the return on investment is no longer adequate, the company
said. Macy’s sales slipped 4% to $5.87 billion in the second fiscal quarter
ending July 30, while profit plunged 95% to $11 million.
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Titan Sales Sluggish on ‘Poor’ Wedding Season
Titan Company’s revenue increased 4% to $415.9 million (INR
27.83 billion) in the first fiscal quarter ending June 30. Growth was slower
than expected as the Bangalore-based jeweler said sales were diminished by a
disappointing wedding season and the recent rise in gold prices. Jewelry sales grew
3% to $319.6 million, while profit dropped 16% to $18.9 million.
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Chow Tai Fook Unveils ‘4Ts’
Chow Tai
Fook launched its ‘4Ts’ campaign enabling customers to track the journey of a
diamond from its source. The ‘Ts’ stand for “traceable, transparent, truthful
and thoughtful” and are being pitched by the Hong Kong jeweler as a new
industry standard. Chow Tai Fook also developed patented technology that
enables it to inscribe on each diamond a unique serial number called the ‘T
mark.’ The inscription will be applied to most of its diamonds starting from
0.15 carats, SI clarity and K color.
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MINING
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Mining Outlook Weighing on Botswana Growth
Botswana’s
gross domestic product contracted 0.2% in the 12 months to March, reflecting a
21% drop in mining production, the Bank of Botswana said. The downward trend
comes as rough diamond exports declined 1.8% to $1.8 billion in the first half
of 2016, despite increasing 16% in the second quarter. The shaky outlook for mining
means Botswana cannot rely on diamonds for economic growth, warned economists
Keith Jefferis and Sethunya Sejoe of Gaborone-based consultancy Econsult.
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Gem Diamonds Slides to 1H Loss
Gem
Diamonds reported a loss in the first half of 2016 due to a $40 million
impairment charge related to downsizing operations at the Ghaghoo mine in
Botswana. Production at Ghaghoo has been cut to 300,000 tonnes per year,
from an earlier plan of 720,000 tonnes, due to weak market conditions. The
miner made a loss of $15.9 million in the six month period versus a profit
of $25.6 million the previous year. Revenue dropped 7.5% to 109.1
million.
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First Gahcho Kué Sale Slated for 4Q
Mountain
Province Diamonds will hold its first sale of rough from the Gahcho Kué mine in Canada in
the fourth quarter. Sales will then take place every five weeks, the company
said. The mine, which is 51% owned by De Beers and the rest by Mountain
Province, is on track to achieve commercial production in January 2017 and is
expected to yield 4.5 million carats a year over a 12-year mine life.
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ALROSA Joins Responsible Jewellery Council
ALROSA has
signed up for the Responsible Jewellery Council (RJC), implying it will undergo
an independent audit of its operations within two years to gain RJC
certification. The appraisal covers finance and legal compliance, as well as
ethical criteria such as anti-corruption measures, human rights, labor
conditions, social responsibility and environmental protection.
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GENERAL
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Young Diamantaires Group Gaining Momentum
A new
initiative to encourage younger diamantaires’ involvement in the industry is
gaining traction ahead of its first major networking event in
September. The ‘Young Diamantaires’ project grew out of a need to get
trade members aged below 45 involved in the World Federation of
Diamond Bourses (WFDB). An informal meeting was held in May at the World
Diamond Congress in Dubai and a social gathering has been scheduled for
September 15 during the Hong Kong Jewellery and Gem Fair.
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Diamond Miners Appoint Key Executives
De Beers
appointed Nigel Simson (pictured) senior vice-president of its
product planning operation at Global Sightholder Sales (GSS). The new unit will
ensure products and services are more tailored to client needs. Bernard Bradley from Volvo Car
Group will replace Simson as senior VP of GSS. In other moves, Dominion
Diamond Corp. appointed former De Beers executive Tim Dabson and mergers and
acquisitions specialist Trudy Curran to its board. Pangolin Diamonds Corp., a
Botswana-focused exploration company, hired former De Beers CEO Gareth
Penny as non-executive chairman.
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Gold Jewelry Demand Declines
Global demand for gold jewelry dropped 9% to $17.98 billion in the
second quarter, according to the World Gold Council (WGC). By volume, demand
slumped 14% to 444.1 tonnes. Demand in the first half sank to $36.3 billion,
its lowest first-half level since 2010. The decline was driven by weak consumer
sentiment in China and the Middle East while gold prices rallied during the
period, the WGC said.
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Diamond Grower Scio Widens Losses
Scio
Diamond Technology recorded a loss of $1.3 million in the first fiscal quarter,
reflecting a 44% decline from a year earlier. The lab-grown diamond producer
cautioned its future remains uncertain even as revenue advanced 7.5% to
$185,061 during the period. The effects of a water leak at its factory in
December, and other risks associated with being a new business, “raise
substantial doubt about the company’s ability to continue as a going concern,”
management said.
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ECONWATCH
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Diamond Industry Stock Report
Macy's (+19%) led rallying U.S. retail stocks this week on news it is streamlining its bricks-and-mortar business. JCPenney (+17.5%) also unveiled a revamped strategy and saw its share price climb, while strong results lifted Kohl's (+19%). Mining stocks were more mixed, led by Rockwell Diamonds (+10%), which continued its recent upward trend.
View the detailed industry stock report
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Aug 18 (12:04 GMT) |
Aug 11 (12:04 GMT) |
Chng. |
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| $1 = Euro |
0.88 |
0.90 |
-0.01 |
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| $1 = Rupee |
66.83 |
66.84 |
-0.01 |
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| $1 = Israel Shekel |
3.78 |
3.81 |
-0.03 |
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| $1 = Rand |
13.35 |
13.37 |
-0.02 |
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| $1 = Canadian Dollar |
1.28 |
1.30 |
-0.02 |
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| Precious Metals |
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Chng. |
| Gold |
$1,350.45 |
$1,345.30 |
$5.15 |
0.4% |
| Platinum |
$1,123.40 |
$1,171.75 |
-$48.35 |
-4.1% |
| Silver |
$19.75 |
$20.16 |
-$0.41 |
-2.0% |
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| Stock Indexes |
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Chng. |
| BSE |
28,123.44 |
27,859.60 |
263.84 |
0.9% |
| Dow Jones |
18,573.94 |
18,495.66 |
78.28 |
0.4% |
| FTSE |
6,858.17 |
6,845.56 |
12.61 |
0.2% |
| Hang Seng |
23,023.16 |
22,580.55 |
442.61 |
2.0% |
| S&P 500 |
2,182.22 |
2,175.49 |
6.73 |
0.3% |
| Yahoo! Jewelry |
665.81 |
657.11 |
8.70 |
1.3% |
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INDIA MARKET REPORT
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Polished Trading Activity
Slow trading and weak sentiment. Dealers preparing
for Hong Kong show. Polished inventory levels high as manufacturing continues
but demand slowed in the past few months. Steady demand for commercial-quality,
SI2-I2 diamonds. Other areas weak. Slow domestic demand for stars and melee.
Rough market stable with lower volumes traded and Russian goods selling at
steady premiums during monthly ALROSA sale.
Read the Polished Diamond Trading Report |
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