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RAPAPORT NEWS SERVICE | December 1, 2016 |
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Rapaport Weekly Market Comment December 1, 2016

Holiday season begins with optimism as stock markets hit record high on Black Friday. Foot traffic flat, average spend -3% to $289 over Thanksgiving weekend, reports NRF. Millennial shift to online purchases continues with Cyber Monday sales +13% to $3.5B, according to Adobe Digital Insights. Polished market stable with buying opportunities in India due to rupee liquidity crisis. Shrenuj nears deal to ease $450M debt as De Beers sight suspended. Christie’s HK sells $79M (80% by lot). Tiffany 3Q sales +1% to $949M, profit +5% to $95M. Lukoil 3Q Grib diamond sales +33% to $62M. Alan Bronstein elected president of Natural Color Diamond Association.

RapNet Data: December 1
Diamonds 1,296,155
Value $7,964,274,890
Carats 1,361,974
Average Discount -30.33%

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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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  The weekend results underline the importance of brands effectively converging digital and physical channels to deliver a single, seamless shopping experience to consumers, particularly during the high-volume holiday season.

Shelley Kohan, vice president of retail consulting at RetailNext, on Black Friday's shift online

United States: Positive sentiment as stock market rally and strong dollar lift expectations for holiday season. Jewelers expect sales bump in coming weeks

Belgium: Trading quiet with steady low-volume orders for the holiday season. Some dealers buying bargains (“Metzios”) amid Indian liquidity crisis

Israel: Polished trading stable with steady orders from U.S. independent retailers. Demand from larger chains has slowed. Little inventory buying as jewelers focus on selling during holiday season

India: Polished trading quiet with dealers very cautious after rupee currency cancellation. Domestic demand slow. Opportunistic foreign buyers looking for bargains during liquidity crunch

Hong Kong: Steady traffic at Jewellery Manufacturers Association Show (Nov. 24-27) but diamond sales weak

Click here for deeper analysis

Cautious ALROSA Seeks to Steady Rough Prices

ALROSA pledged to keep rough diamond prices stable in an effort to support manufacturers’ profit margins after demand improved this year. Sales jumped 54% in the first nine months of the year with prices generally steady at its monthly sales, chief executive officer Andrey Zharkov said. The miner plans to increase diamond production by 5% to 38.85 million carats next year, Russian news service TASS cited Zharkov as saying.

Shrenuj Nears Debt Deal to Ease Liquidity Crisis

Shrenuj & Co. is close to securing at least $100 million in funding to ease its debt crisis. The Mumbai-based company is in the final stages of preparing the deal, which it expects to announce in mid-December, sources said. Shrenuj has bank debts amounting to $450 million, of which $35 million is overdue. A strain on liquidity has forced the company to scale down its diamond-cutting operations in Botswana, while its De Beers sightholder status was suspended in July.

Blue Diamond Tops Billing at Christie’s Hong Kong

Christie’s garnered $79 million (HKD 611 million) at its Hong Kong Magnificent Jewels auction, selling 80% by lot and 84% by value. The highlight was the sale of a marquise-cut, 4.29-carat, fancy vivid blue, internally flawless diamond ring for $11.8 million, or $2.7 million per carat. Christie’s also sold the oval-shaped, 10.05-carat ‘Ratnaraj’ ruby and diamond ring for $10.2 million, which at just over $1 million per carat was the third-highest average price on record for a ruby.

Sotheby’s Hong Kong Jewelry Auction Fetches $3.5M

Sotheby’s notched sales of $3.5 million (HKD 26.8 million) at its Important Jewels and Jadeite auction in Hong Kong. The most expensive item was an early 20th-century gem-set and diamond dragon bracelet, which fetched $266,000, double its pre-sale upper estimate of $103,160. A brilliant-cut round, 6.01-carat, D-color, internally flawless diamond failed to sell, having had a low-end pre-sale estimate of $515,800. The auction was sold 56% by lot and 37% by value.

Sarine Profit Signals Manufacturing Recovery

Sarine Technologies said third-quarter sales jumped 82% to $17.3 million due to stronger polished demand in key markets and a recovery in the rough sector. The company, which supplies equipment to diamond manufacturers, reported a profit of $4 million versus a loss of $1.4 million a year ago. Sales still lag the $20.4 million revenue reported two years ago, despite the significant growth from 2015.

Black Friday Sales Decline

Sales and foot traffic at physical stores in the U.S. fell over the Thanksgiving and Black Friday weekend as more retail business moved online, initial figures showed. In-store sales declined 4.2% and traffic fell 4.4%, according to RetailNext. ShopperTrak said foot traffic was flat on Black Friday and declined 1% across the two days. The average spend fell 3% from last year to $289 over the weekend, according to the National Retail Federation.

Cyber Monday Pulls Ahead

Online retail activity over Black Friday and Cyber Week increased from last year. Sales from desktop computers climbed 17% to $1.29 billion on Thanksgiving and jumped 19% to $1.97 billion on Black Friday, ComScore reported. Online sales during Cyber Monday rose 12% to $3.4 billion with toys and electronics driving ecommerce spending, according to Adobe Digital Insights.

Tiffany Sparkles With Rare Sales Rise

Tiffany & Co.’s sales increased 1% to $949.3 million in the three months that ended October 31 marking the jeweler’s first sales rise in two years. An improvement in fashion jewelry drove growth, partly offsetting flat engagement and wedding jewelry and weak high-end statement pieces. At constant exchange rates, sales were flat, while comparable store sales fell 3%. Net earnings increased 5% to $95.1 million.

Hearts On Fire Hit by U.S. Challenges

Revenue generated by the Hearts On Fire jewelry brand declined in the first fiscal half because of tough conditions in the U.S. retail market, its Hong Kong-based parent Chow Tai Fook reported. Hearts On Fire sales slid 9% to $41.8 million (HKD 324.5 million) in the six months ending September 30, while its operating loss widened 21% to $8.5 million. The brand’s wholesale revenue slumped 14%, while its retail revenue increased 12%.

Lukoil’s Diamond Mine Sales Jump

Lukoil’s diamond revenue from its Grib mine in Russia rose 33% to $61.9 million (RUB 4 billion) in the third quarter. Sales more than doubled to $232.3 million in the first nine months from $108.4 million a year ago. Lukoil, Russia’s largest oil producer, started recovering rough diamonds at Grib in September 2014 and production continues to ramp up to full capacity.

Lucapa Secures Angola Exploration Permit

Lucapa Diamond Company received approval to explore the Lulo Diamond Project in Angola for another five years. Lucapa has already stepped up its kimberlite exploration program in anticipation of the government approval, with two rigs drilling the priority kimberlite targets and a third due to arrive in Angola in December. The Lulo alluvial mine is the source of several large rough diamonds, including the biggest in Angola’s history that fetched $16 million in February.

DiamondCorp Battles to Save Lace Mine

Deloitte began talks with stakeholders in the Lace Diamond Mine (LDM) as parent company DiamondCorp continues to assess the viability of its troubled South African operation. LDM entered business rescue earlier this month after torrential rain left the South African mine flooded, resulting in a suspension of operations for more than 12 weeks.

Two Diamond Mines for Sale in South Africa

Rockwell Diamonds placed two of its mines on the selling block in an attempt to turn the company’s fortunes around. The junior miner started a process to sell the Remhoogte/Holsloot and Saxendrift mines in South Africa to streamline its operations. The turnaround plan encompasses measures to accelerate production at the Wouterspan mine, which includes moving its Holsloot processing plant to the site.

Cartier Insists Walmart Not Authorized Distributor

Cartier distanced itself from an $18,000 diamond watch sold online by Walmart on Black Friday and said the department store is not one of its official retailers. Walmart listed the Cartier Roadster XL Chrono men’s timepiece on its ecommerce site with an advertised price roughly 60% off the manufacturer's suggested retail price of $46,500. Cartier said it had no knowledge or involvement in selling or marketing the item and could not confirm its authenticity.

Richemont to Cut 211 Swiss Watch Jobs

Richemont is on the cusp of another round of layoffs at its Swiss watchmaking operations as demand for timepieces sank this year. The company plans to cut 211 jobs at Piaget and Vacheron Constantin, Swiss trade union Unia said. This follows 300 layoffs across Piaget, Vacheron Constantin and Cartier in May, according to Unia. Sales at Richemont’s specialist watchmakers slid 17% in the six months to September 30, mirroring a decline in Swiss watch exports.

Bronstein to Lead Color Diamond Association

The Natural Color Diamond Association elected Alan Bronstein of Aurora Gems (pictured) as president, replacing JFine Inc.’s Jordan Fine in the position. Jose Batista of Rio Diamond Corp. was voted in as vice-president, sharing the role with Breanne Wittrock. Scott West of L.J. West Diamonds will take over the roles of secretary and treasurer from Jeffrey Post of Gem Platinum. All members will start their new positions in January.

Diamond Industry Stock Report

After the U.S. market hit a record on Black Friday, retail stocks fell as early holiday sales data pointed to a shift away from physical stores to online shopping. Charles & Colvard (-11.4%), Macy's (-6%) and Nordstrom (-4.5%) led the declines, but Tiffany (+4.2%) gained on better-than-expected results. European and Far Eastern luxury stocks were solid, led by Hong Kong-based Chow Sang Sang (+4.5%). Indian industry stocks showed a limited recovery after recent slides following the government's clampdown on cash transactions, led by Gitanjali Gems (+14%). Mining stocks were mixed.

View the detailed industry stock report

  Dec 1 (13:54 GMT) Nov 24 (13:30 GMT) Chng.  
$1 = Euro 0.94 0.95 -0.01  
$1 = Rupee 68.37 68.72 -0.34  
$1 = Israel Shekel 3.83 3.88 -0.04  
$1 = Rand 14.10 14.23 -0.13  
$1 = Canadian Dollar 1.34 1.35 -0.01  
Precious Metals       Chng.
Gold $1,168.52 $1,185.20 -$16.68 -1.4%
Platinum $904.75 $916.25 -$11.50 -1.3%
Silver $16.38 $16.32 $0.06 0.4%
Stock Indexes       Chng.
BSE 26,559.92 25,860.17 699.75 2.7%
Dow Jones 19,123.58 19,083.18 40.40 0.2%
FTSE 6,708.46 6,811.33 -102.87 -1.5%
Hang Seng 22,878.23 22,608.49 269.74 1.2%
S&P 500 2,198.81 2,204.72 -5.91 -0.3%

Polished Trading Activity

Polished trading quiet with dealers very cautious after rupee currency cancellation. Domestic demand slow. Opportunistic foreign buyers looking for bargains during liquidity crunch. Larger manufacturers with legitimate invoicing relatively unaffected with steady U.S. orders. Rough demand stable since manufacturers returned from Diwali break.

Read the Polished Diamond Trading Report

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