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RAPAPORT NEWS SERVICE | November 19, 2015 |
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Rapaport Weekly Market Comment November 19, 2015

Polished trading improves slightly, supported by shortages and U.S. holiday demand. Retailers discounting for Black Friday with Amazon offering 70% on fashion jewelry and Macy’s 30% on engagement rings. U.S. Oct. price index for jewelry -1%. India’s Diwali jewelry sales moderate. HK jewelers under pressure as Luk Fook warns 1H profit -40%. Gold slump to 5-year low ($1,065/oz.) may boost Chinese New Year sales of low-margin gold jewelry. Rough market very quiet as cutters refuse to manufacture at high prices. India’s Oct. polished exports -17%. Civil Society boycotts Kimberley Process over UAE chairmanship. Lucara finds historic 1,111ct. and 843ct. diamonds at Botswana Karowe mine.

RapNet Data: November 19
Diamonds 1,142,147
Value $8,009,571,477
Carats 1,258,453
Average Discount -28.88%

RAPI Chart
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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  The significance of the recovery of a gem-quality stone larger than 1,000 carats, the largest for more than a century, cannot be overstated.

Lucara president and chief executive officer William Lamb on the recovery of a 1,111-carat diamond from the Karowe mine in Botswana

United States: Sentiment improving with some last-minute holiday demand ahead of Black Friday / Thanksgiving weekend. Buyers more aggressive...

Belgium: Antwerp trading quiet. Concern that Paris attacks will reduce European consumer and tourist spending this Christmas...

Hong Kong: Some improvement with buyers looking for bargains in Far East while India is closed.Savvy diamond dealers capitalize on Single’s Day ...

India: Activity slow with manufacturers still on Diwali break. Dealers slowly returning to work and regular activity expected to resume next week...

Israel: Slight improvement in the past few weeks with dealers focused on filling U.S. holiday orders. Dealers lack confidence as turnover below... 

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Civil Society Coalition to Boycott Kimberley Process

The Kimberley Process Civil Society Coalition (CSC) will boycott next year’s Kimberley Process (KP) in response to the United Arab Emirates’ (UAE) chairmanship of the organization. The group said it lacked a sincere partner in the effort to work with the UAE to address governance issues ahead of the country taking the helm in 2016.

The CSC said concern has been raised about the “undervaluation” of diamonds entering the UAE, claiming that exports of diamonds from Dubai in 2014 were on average 40% higher than their original import values. Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Centre (DMCC), said the CSC’s remarks were “baseless.”

India’s Polished Exports -17%

India’s polished diamond exports fell 17% to $1.8 billion year on year in October, according to data from the Gem & Jewellery Export Promotion Council. The average price of the exports plunged 29% to $499.44 per carat.

Polished imports plummeted 53% to $282.2 million during the month. As a result, net polished exports, or exports less imports, declined 4% to $1.6 billion.

India’s rough imports increased 15% to $1.1 billion in October and rough exports slumped 38% to $66.7 million. Net rough imports increased 21% to $1 billion.

The net diamond account, representing the excess of total exports of polished and rough over total imports, fell 30% to $551.1 million.

IDE President Won’t Seek Re-election

Israel Diamond Exchange (IDE) president Shmuel Schnitzer will not run for re-election in mid-December, a spokesperson for the IDE confirmed with Rapaport News.

The election is being contested between Yoram Dvash, owner of Yoram Dvash Diamonds, and Arnon Yuval, partner at S. Yuval & Co. Both currently serve on the IDE’s executive committee.

Schnitzer, who is chief executive officer and chairman of S. Schnitzer Diamonds, served as IDE president from October 2013 following a previous term from 1998 to 2004. He was president of the World Federation of Diamond Bourses between 2002 until 2006.

Rajesh Exports’ Revenue, Profit Surge

Indian jewelry manufacturer and marketer Rajesh Exports reported sales rose about four-fold in the second quarter, pushing up net profit by 75%.

Revenue surged to $6.7 billion (INR 443.2 billion) in the three-month period that ended September 30, the company said in a statement. Net profit climbed to $43.3 million as expenses advanced to $6.6 billion.

Results included revenue and profit figures for August and September from metal refining group Valcambi, which Rajesh acquired for $400 million at the end of July.

Scio’s Revenue Doubles, Loss Widens

Lab-grown diamond producer Scio Diamond Technology Corporation reported sales more than doubled in the second quarter following an increase in the production of single-crystal colorless stones.

Revenue surged to $236,292 in the three months that ended September 30, the Greenville, South Carolina-based company said in a statement. Cost of goods sold jumped 13% to $461,279 from a year ago and the net loss rose 8% over the same period to $809,588.

U.S. Jewelry Prices Fall 1% in October

The U.S. consumer price index (CPI) for jewelry fell 1.1% in October from the previous month, according to the U.S. Bureau of Labor Statistics. The CPI’s reading for the month was down 2.2% from a year ago.

October’s CPI for watches at 124.30 points was down 1.4% over the previous month; it was flat relative to a year earlier.

Meanwhile, U.S. specialty jewelry-store sales in September barely changed year on year, dipping 0.6% to $2 billion, according to the U.S. Census Bureau. On an adjusted basis taking into account seasonal fluctuations, sales dropped 0.5% to $2.5 billion. The sales data lags by a month.

Swiss Watch Exports Slip 12%

Swiss watch exports fell 12.3% year on year to $2 billion (CHF 2 billion) in October as exports to Hong Kong, China and the U.S. fell. Wristwatch exports decreased by 13% to $1.9 billion, while other timepiece exports declined 4.4% to $119 million, according to figures from the Federation of the Swiss Watch Industry.

The poor result stems primarily from an acute contraction of the main markets of Asia and the United States, the Federation said.

The largest drop in exports occurred in watches made from gold and steel, which slid 22% to $260 million. Exports to key consumer markets dropped substantially, with sales to Hong Kong down 39% to $258 million, exports to the U.S. down 12% to $232 million and sales to China declining 5% to $120 million.

Macy’s Cuts Prices for Black Friday

U.S. retailer Macy’s will offer shoppers a 30% discount on diamond engagement rings as part of its Black Friday specials, according to a company announcement.

The sale will include purchases made in-store and online beginning in the evening of Thanksgiving, November 26. Select items in the retailer’s fashion jewelry lines will be priced at “buy one, get one free.”

Amazon to Offer 70% off Diamond Jewelry will offer discounts of as much as 70% on selected diamond jewelry and up to 50% off selected luxury watches for women as part of its Black Friday deals.

The discount bonanza will start November 20, a week ahead of Black Friday, with new deals being added on a dedicated site as often as every five minutes for eight consecutive days. It will also offer 10 ‘Deals of the Day’ starting at midnight on Thanksgiving, November 26, and up to another 10 more promotions on Black Friday, November 27.

Last year, holiday-season sales from Amazon’s e-commerce app doubled in the U.S., and Black Friday had the fastest growth in mobile shopping, according to the company.

Blackstone Acquires Diamonds Direct

Private equity firm Blackstone Group has acquired jewelry retailer Diamonds Direct for an undisclosed sum. Diamonds Direct, founded in 1995 in Charlotte, North Carolina, has grown to become a multi-channel retailer, with several stores across the U.S. as well as an e-commerce platform.

The takeover, which closed in early November, was completed through an affiliate company, Blackstone Tactical Opportunities, the U.S.-based asset manager said in a statement November 16. The same affiliate acquired equity in Canadian miner Stornoway Diamond Corporation and a minority interest in the Renard diamond stream in Québec in April.

Luk Fook Issues Profit Warning

Luk Fook Holdings’ profit will probably plummet about 40% as the Hong Kong-based retailer saw a decline in sales amid rising costs in the first half of its calendar year.

Revenue from gem-set jewelry products will fall, cutting gross margin, in the six months to September 30, the company said in its guidance before the release of full results on November 30.

Lucara Finds Second-Largest Diamond in History

Lucara Diamond Corp. has recovered a 1,111-carat stone from its Karowe mine in Botswana, claiming it is the second-largest gem-quality diamond ever recovered and the largest since the 3,106-carat Cullinan diamond in 1905.

The type-II stone, measuring 65mm x 56mm x 40mm, is the largest diamond ever retrieved through a modern processing facility and the largest recovered in Botswana, according to the Canadian miner.

“The significance of the recovery of a gem-quality stone larger than 1,000 carats, the largest for more than a century, cannot be overstated,” president and chief executive officer William Lamb said. Lucara also recovered two diamonds weighing 813 and 374 carats from Karowe, it said.

The announcement came after the group reported sales of $29.7 million from its recent exceptional stone tender, with 13 diamonds from Karowe selling for an average of $20,625 per carat.

ALROSA Makes Double Hire

ALROSA has hired Vladislav Zhdanov as vice president from machine maker Zhejiang Noblelift Equipment JSC, handing him responsibility for the Russian miner’s financial security, internal audit and risk management. The appointment follows the Russian government’s recent approval of a corporate governance code that mandates more effective risk management and calls for the creation of relevant new business units.

Meanwhile, the miner appointed Oleg Petrov as director of its United Selling Organisation (USO), the Moscow-based unit that sorts, prepares, valuates and sells ALROSA's diamond production. Petrov joined the Russian mining group in September as an adviser to president Andrey Zharkov. He was previously sales and marketing director at potash fertilizer company PJSC Uralkali, ALROSA said.

De Beers Appoints Strategy Director

De Beers has appointed Bruce Cleaver as group director for strategy and business development, responsible for industry trend analysis. He will retain his place on the board as a non-executive director, according to parent company Anglo American.

Chief financial officer Gareth Mostyn has taken on Cleaver’s previous role as executive head of strategy and corporate affairs. Both appointments are effective January 1, 2016. A new CFO will be chosen in due course, Anglo said.

De Beers To Host Botswana Conference

De Beers will co-host a conference in Gaborone later this month in conjunction with Botswana’s Ministry for Minerals, Energy and Water Resources, dealing with the impact of the diamond industry on the country’s development.

The two-day event on November 23 and 24, entitled ‘Connecting Resources and Society,’ will address how the responsible management of resources can ensure diamond exploration benefits future generations. All sessions will be available to view online.

India Plans Advertising Push

India’s Gem & Jewellery Export Promotion Council (GJEPC) is planning to team up with the world’s leading miners to drum up interest in the country’s diamonds through promotional campaigns and celebrity endorsements, according to The Economic Times.

The council is considering joining hands with the likes of Rio Tinto, ALROSA and De Beers for marketing diamonds into strategic hubs such as China, Latin America and the Middle East, the daily newspaper reported.

The trade body will hire country-specific advertizing agencies to initiate campaigns based on local purchasing trends, the newspaper cited GJEPC chairman Praveen Shankar Pandya as saying.

Diamond Industry Stock Report

Industry-related stocks were broadly down over the past week. U.S. retailers fell, led by Birks Group (-16%) and Nordstrom (-10%). Chinese jewelry retailer shares followed declines in the local Hang Seng index, led by Luk Fook (-7.6%) and Chow Tai Fook (-3.4%). Miners’ shares were largely down, including declines in Rockwell Diamonds (-15%) and Firestone Diamonds (-15%).

View the detailed industry stock report.

  Nov. 19 (10:30 GMT) Nov. 12 (10:00 GMT) Chng.  
$1 = Euro 0.94 0.93 0.003  
$1 = Rupee 66.16 66.01 0.1  
$1 = Israel Shekel 3.89 3.90 -0.01  
$1 = Rand 14.13 14.21 -0.08  
$1 = Canadian Dollar 1.33 1.33 0.00  
Precious Metals       Chng.
Gold $1,070.72 $1,087.45 -$16.73 -1.5%
Platinum $849.42 $979.50 -$130.08 -13.3%
Silver $14.18 $14.42 -$0.24 -1.7%
Stock Indexes       Chng.
BSE 25,792.40 25,866.95 -74.55 -0.3%
Dow Jones 17,737.16 17,702.22 34.94 0.2%
FTSE 6,255.82 6,255.82 0.00 0.0%
Hang Seng 22,888.92 22,888.92 0.00 0.0%
S&P 500 2,075.00 2,075.00 0.00 0.0%
Yahoo! Jewelry 1,050.48 1,050.48 0.00 0.0%

Polished Trading Activity

Activity slow with manufacturers still on Diwali break. Dealers slowly returning to work and regular activity expected to resume next week. Suppliers under pressure as buyers not aggressively looking for goods. Sentiment dampened by local and foreign bankruptcy reports. Diwali jewelry sales reportedly flat while general retail spurred by strong online sales. Local demand expected to remain steady through wedding season with sales spurred by low gold prices (INR 70,809/oz).

Read the Polished Diamond Trading Report


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