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RAPAPORT NEWS SERVICE | February 23, 2017   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment February 23, 2017

High hopes for next week’s Hong Kong show after China jewelry sales improved during the Chinese New Year. Polished prices steady as suppliers await outcome of the show and defend high rough prices. Manufacturing rising with steady rough demand during sight week. De Beers 2016 earnings +159% to $667M, revenue +30% to $6.1B, to raise 2017 production from 27M to 31-33M cts. Lucara 2016 sales +32% to $296M, profit -9% to $71M. Petra Diamonds 1H revenue +48% to $229M, profit of $35M vs. $2M previous year. Dominion 2016 sales -21% to $571M, Ekati production +40% to 5.2M cts. India Jan. polished exports +3% to $1.6B, rough imports +28% to $1.3B. ALROSA CEO Andrey Zharkov to step down.

RapNet Data: February 23
Diamonds 1,235,554
Value $7,550,793,072
Carats 1,322,250
Average Discount -30.19%

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RAPI Chart
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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  QUOTE OF THE WEEK
  They’re probably the oldest thing any of us will ever touch.

De Beers head of strategy Gareth Mostyn on the value of natural diamonds.

MARKETS  
 
United States: Polished market stable with buyers looking for deals and pushing for higher discounts. Steady demand for 1 to 2.99 ct., D-J, VS1-SI1 diamonds

Belgium: Sentiment weak as trading slowed in February. Difficult to find the right goods at the right price

Israel: Trading slowed after busy International Diamond Week. Rising expectations for Hong Kong show (Feb. 28 to Mar. 4) with large delegation of 83 exhibitors in Israel pavilion

India: Trading cautious with foreign buyers looking for bargains and dealers waiting for better prices at the Hong Kong show

Hong Kong: Positive sentiment as trading improves ahead of the show. Buyers looking for goods as they expect suppliers to hold prices firm during the show in order to cover exhibition expenses

Click here for deeper analysis


RAPAPORT STATEMENT  
 
Rapaport Statement on President Trump’s Trade Policy

President Trump’s trade policy is based on his principles of “America First” and “Reciprocity.” America must use its purchasing market power to ensure reciprocal benefits from trade partners...

Click here for the full statement


FIVE-MINUTE INTERVIEW  
 
De Beers Foresees Pleasingly Normal 2017

After diamond inventory levels returned to normal in 2016, De Beers is raising its production and marketing activity to spur growth, says Gareth Mostyn, head of strategy and corporate affairs...

Click here to continue reading


INDUSTRY  
 
De Beers Profit Jumps as Diamond Market Stabilizes

Profit more than doubled for De Beers last year as trading conditions in the diamond-manufacturing sector improved and inventory levels stabilized. Underlying earnings jumped to $667 million in 2016 from $258 million a year earlier. This came as revenue grew 30% to $6.07 billion, reflecting a 37% hike in rough-diamond sales to $5.6 billion. The midstream of the diamond industry returned to buying rough after a 2015 slump in demand, parent company Anglo American explained.


 
ALROSA President Zharkov to Step Down

Andrey Zharkov (pictured) will resign as president of ALROSA, a source close to the Russian diamond miner said. Zharkov’s three-year term as president expires in May 2018, but the timing of his departure is unclear. The Russian government is considering Sergey Ivanov – ex-head of insurer SOGAZ and son of the former head of the Kremlin administration – as Zharkov’s replacement, according to Reuters.


 
India’s Diamond Trade Bounces Back

Diamond trading in India improved in January, according to data from the Gem & Jewellery Export Promotion Council (GJEPC), as the country’s manufacturing sector continues to recover from a liquidity squeeze in the final months of last year. Imports of rough diamonds, an indicator of demand from India’s large cutting-and-polishing sector, jumped 28% to $1.26 billion during the month. Polished exports increased 3% to $1.62 billion.


RETAIL & WHOLESALE  
 
Luxury Veterans Join Tiffany Board

Tiffany & Co. has expanded its board to include three seasoned retail executives. Roger Farah, a former chief operating officer of Ralph Lauren, will become an independent director, alongside Francesco Trapani, who was CEO of Bulgari during its takeover by LVMH Moët Hennessy Louis Vuitton in 2011. Joining the duo on the board will be James Lillie, who was CEO of Jarden Corporation until its sale to Newell Brands in April 2016. Tiffany chairman Michael Kowalski also indicated he planned to step down.


 
Forevermark Hits 2,000-Store Milestone

Forevermark has entered its 2,000th retail location worldwide, eight years after the De Beers-owned diamond brand was born. Forevermark, which professes to offer only natural, untreated and responsibly sourced diamonds, has expanded to 25 markets since its launch in 2008, De Beers said. In 2016, the number of retail doors rose 14%.


 
Gitanjali Slides on Weak Diamond Sales

Gitanjali Gems’ share price slumped after the Indian jeweler reported a drop in sales and profit for its fiscal third quarter, which ended December 31, 2016. The company, one of India’s largest jewelry retailers, said revenue had fallen 1.4% year on year to $499.9 million (INR 33.53 billion) during the period. Net profit slid 17% to $8.7 million.


 
Store Growth Drives Michael Hill Sales

Michael Hill’s sales increased 5% to $250.9 million (AUD 327.5 million) during the fiscal first half ending December 31, as it expanded its store network. Same-store sales crept up 0.8%, while net profit after tax grew 3.4% to $19.7 million, the Australia-based jeweler reported. The company operated 305 stores under the Michael Hill brand at the end of December – 12 more than a year earlier. The retailer also added a net 13 stores under its Emma & Roe brand.


MINING  
 
Dominion Sales Fall After Ekati Fire

Sales at Dominion Diamond Corporation slumped 21% to $570.9 million in the fiscal year that ended January 31, due to a fire at its Ekati mine and sluggish demand for smaller rough stones. Revenue slid 29% in the third quarter and 27% in the fourth quarter. Ekati closed for three months after the fire in June, while a liquidity crisis in India also dented demand for smaller stones, the company explained.


 
Lucara Profit Drops Amid Currency Shift

Lucara Diamond Corp.’s profit declined 9% to $70.7 million in 2016 as higher taxes and foreign exchange rates worked to the company’s disadvantage. The company reported a foreign-exchange loss of $11 million compared with a gain of $15 million a year earlier. Revenue from rough-diamond sales jumped 32% to $295.5 million, or $824 per carat.


 
Petra Cautious After Labor Unrest

Petra Diamonds warned its production may be toward the lower end of prior projections after labor action caused delays at its Cullinan mine in South Africa. Output for the fiscal year ending June 30 is still on track to be within the guidance of about 4.4 to 4.6 million carats, the miner said. Sales jumped 48% to $228.5 million during the half-year ending December 31.


 
Stellar Agrees to Operate Sierra Leone Mine

Stellar Diamonds has entered a subcontracting arrangement to operate the Tonguma mine in Sierra Leone, after opting out of a deal to acquire the deposit. Under the arrangement, Stellar will run the mine and sell the resulting diamonds, paying a percentage of revenues to the project’s owner, Octea Mining. Stellar, which already owns the adjacent Tongo mine, had initially been in talks to acquire Tonguma from Octea.


GENERAL  
 
Swiss Watch Exports Continue to Decline

Swiss watch exports fell 6% to $1.42 billion (CHF 1.43 billion) in January, according to the Federation of the Swiss Watch Industry. The downward trend has flattened out since November but remains negative, the federation said. Exports to Hong Kong, Switzerland’s largest trade partner for timepieces, slipped 3.9% to $197.3 million – a comparatively mild drop after a 25% overall slide for 2016.


 
GIA Executive to Head Diamond Empowerment Fund

The Diamond Empowerment Fund (DEF) announced that Anna Martin would be serving as its new president, succeeding Phyllis Bergman, who is departing after a five-year term. Martin (pictured) is senior vice president for global development and beneficiation at the Gemological Institute of America (GIA).


ECONWATCH  
 
Diamond Industry Stock Report

Large diamond miners’ stocks had a disappointing week, with Dominion Diamond (-12%) leading the declines after reporting a drop in full-year sales. ALROSA (-4.5%) fell amid uncertainty over who will replace its departing president. Petra Diamonds (-3.7%) also lost ground after issuing cautious production guidance following a mining disruption. In the U.S., Birks Group (-9%) headed the declines in a generally poor week for retail stocks.

View the detailed industry stock report

  Feb 23, 2017 (13:36 GMT) Feb 16, 2017 (13:26 GMT) Chng.  
$1 = Euro 0.95 0.94 0.01  
$1 = Rupee 66.72 67.01 -0.30  
$1 = Israel Shekel 3.70 3.72 -0.02  
$1 = Rand 12.86 12.98 -0.12  
$1 = Canadian Dollar 1.31 1.30 0.01  
         
Precious Metals       Chng.
Gold $1,244.78 $1,238.43 $6.35 0.5%
Platinum $1,011.50 $1,015.20 -$3.70 -0.4%
Silver $18.11 $18.05 $0.06 0.3%
         
Stock Indexes       Chng.
BSE 28,892.97 28,301.27 591.70 2.1%
Dow Jones 20,775.60 20,611.86 163.74 0.8%
FTSE 7,302.77 7,276.94 25.83 0.4%
Hang Seng 24,114.86 24,107.70 7.16 0.0%
S&P 500 2,362.82 2,349.25 13.57 0.6%


INDIA MARKET REPORT  
 
Polished Trading Activity

Trading cautious with foreign buyers looking for bargains and dealers waiting for better prices at the Hong Kong show. Domestic demand quiet with small independent retailers still acclimatizing to new demonetization rules. Steady demand for 1 ct., G-J, VS-SI diamonds. Manufacturing back to normal levels with shortage of small Indian rough during sight week.

Read the Polished Diamond Trading Report






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