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Rapaport Weekly Market Comment
May 17, 2013
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Rough markets under pressure with some boxes selling at about 5% discounts following De Beers 4% price increase at last week's $600M sight. Polished trading very slow as Chinese and Indian consumers and retailers buying gold instead of diamonds. Big stone boom continues. Christie’s Geneva sells $102.1M (86% by lot) with Pear Shape, 101.73 ct., D, FL diamond sold to Harry Winston for $26.7M ($254K/ct.). Sotheby’s Geneva sells $78.2M (87% by lot) with Cushion, 27.90 ct., D, IF diamond ring selling for $4.4M ($156K/ct.). Belgium’s April polished exports +23% to $1.2B, rough imports +38% to $1.4B. Swatch chairwoman Nayla Hayek appointed CEO of Harry Winston.
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| RapNet Data: May 16 |
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| Diamonds |
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1,003,940 |
| Value |
$6,465,629,457 |
| Carats |
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1,093,051 |
| Average Discount |
-27.12% |
www.rapnet.com
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QUOTE OF THE WEEK
Despite the retrenchment in the gold price during the quarter, there was a dramatic increase in demand for jewelry, bars and coins. That is a testament to the fact that demand for the physical asset is robust.
Jason Toussaint | World Gold Trust Services
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants, and entry level positions for our offices in New York, Antwerp, Mumbai, Dubai, and Shanghai. View jobs now.
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INDUSTRY
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Gold Jewelry Demand Jumps
The World Gold Council (WGC) reported that global jewelry demand by weight jumped 12 percent year on year for the first quarter of 2012, led by 19 percent growth in China and 15 percent growth in India and the Middle East. Demand from the U.S. rose 6 percent. Demand for coins and bars surged 52 percent in India, jumped 43 percent in the U.S. and increased 22 percent in China.
However, overall demand for gold in the first quarter fell 13 percent due to large outflows from gold exchange-traded funds. By value, gold demand fell 16 percent to $50.5 billion and the average price of gold fell 3 percent per ounce.
Marcus Grubb, the managing director at the WGC, explained that first quarter figures showed the fundamentals of gold remained robust prior to the price drop in April.
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De Beers Raises Prices
The De Beers May sight had an estimated value of $600 million as the company raised its rough diamond prices by approximately 4 percent. The price hike reflected a change in list prices on various goods as well as adjustments made to De Beers box assortments.
Dealers noted that trading on the secondary market was significantly reduced following the sight that ended on May 9 as De Beers goods are now selling at around list price, erasing the 5 percent premiums they had gained in the past few months. One India-based sightholder noted that they were losing money on the secondary market when accounting for the various broker fees and other costs associated with the goods.
Most sightholders were frustrated by the sight and expressed surprise at the price hike as it followed an increase of approximately 3 percent implemented in April. Rapaport estimates that rough prices have increased by approximately 10 percent so far in 2013. In contrast, the RapNet Diamond Index (RAPI) for 1-carat certified polished diamonds has increased by only 0.3 percent, while RAPI for 0.30-carat stones has risen 9 percent this year, driven by strong Chinese demand for these goods.
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RETAIL & WHOLESALE
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U.S. Jewelry Store Sales +10%
Jewelry store sales in the U.S. rose 9.9 percent year on year to $2.31 billion in March. In addition, the consumer price index (CPI) for jewelry fell 2.9 percent in March. Jewelry store sales remained strong during the first quarter, increasing 8.2 percent to $6.99 billion compared with the first three months of 2012. The CPI for jewelry has also been lower each month this year. Meanwhile, advanced estimates for sales at U.S. department stores in April reflected a decline of 6.9 percent year on year at $13 billion. The estimated sales for all retail and food services, excluding motor vehicle and parts, rose 3 percent in April to $334.3 billion. Retail trade sales improved 3.6 percent during the month.
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Christie's Sells 101.73ct. for $27M
WATCH NOW: Christie’s Geneva sale of magnificent jewels totaled $102.1 million and was 86 percent sold by lot. The top lot was a 101.73-carat, D, flawless pear-shaped diamond that sold for $26.7 million, or $254,400 per carat, to Harry Winston Inc., which promptly named the stone the Winston Legacy. The second top lot of the sale was a single-strand natural pearl necklace that sold for $8.5 million. Laurence Graff bought a 26.24-carat, D, potentially flawless oval-shaped diamond ring for $4.5 million and a 23.43-carat, D, potentially flawless diamond sold to Essex Global Trading for $3.6 million.
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Sotheby's Sale Nets $78M
Sotheby's Geneva garnered $78.2 million at its auction of magnificent and noble jewels with 87 percent sold by lot. The top lot was a 27.9-carat, D, internally flawless cushion-shaped modified brilliant-cut diamond ring that fetched $4.4 million or $156,362 per carat. A cushion-shape, 74.53-carat, SI1, fancy yellow diamond sold for $2.9 million. A pair of natural pearl and diamond pendant earrings from the collection of screen legend Gina Lollongbrigida sold for $2.4 million, setting an auction record for a pair of pearl ear pendants. Jewels from Lollongbrigida sold for double their presale estimate and fetched $4.96 million.
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Online Retail Sales +13%
Online metrics firm comScore Inc. reported that retail ecommerce sales in the U.S. jumped 13 percent year on year to $50.2 billion during the first quarter that ended on March 31. The top-performing online product categories were, digital content and subscriptions, apparel and accessories, sport and fitness, consumer electronics and consumer packaged goods all of which grew at least 20 percent year on year. The ecommerce spending at retailers during the quarter accounted for 10.6 percent of discretionary dollars spent, the highest share on record, according to comScore.
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JCPenney's Loss Jumps to $348M
J.C. Penney Company Inc. reported sales plummeted 16.4 percent year on year to $2.64 billion for the first fiscal quarter that ended on May 4. Same-store sales dropped 16.6 percent. The retailer reported a loss of $348 million or $1.58 per share compared with a loss of $163 million or 75 cents per share one year ago. The company began to reverse a major restructuring program during the quarter for which it incurred $72 million in management transition charges. JCPenney took a home office and stores charge of $28 million, store fixtures charge of $28 million and management transition charge of $16 million.
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DGSE's Profit -40%
DGSE Companies reported that revenue fell 7 percent year on year to $30.5 million and profit plunged 40 percent to $300,412 for the first quarter that ended on March 31. While the company experienced revenue increases for its bullion segment and the wholesale watch division, this was offset by decreases in sales for jewelry, and scrap and rare coin segments. Gross profit margin dropped to 18.4 percent from 20.5 percent one year ago, due primarily to a change in product mix with more revenue from lower-margin bullion sales, and less from higher-margin jewelry and scrap sales.
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Hayek to Head Harry Winston
The Swatch Group appointed Nayla Hayek, the chairwoman of the company, as the new CEO of Harry Winston Inc., the former retail arm of Harry Winston Diamond Corporation. Hayek had already been nominated chairwoman of Harry Winston when the luxury retailer was acquired in March.
Swatch purchased Harry Winston as part of $1 billion agreement with Harry Winston Diamond Corporation, which changed its name to Dominion Diamond after the sale.
Swatch reported group sales of $8.8 billion in 2012, up 14 percent year-on-year and profit surged 26 percent to $1.8 billion. The company anticipates revenue growth of 5 percent to 10 percent in 2013.
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MINING
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Gemfields Production +33%
Gemfields reported that production from its Kagem emerald mine in Zambia jumped 33 percent year on year to 6.5 million carats for the third fiscal quarter that ended on March 31. Kagem's grade also improved during the period, from 236 carats per tonne of ore one year ago to 265 carats this year and Gemfields lowered unit production costs 34 percent to 56 cents per carat.
The bulk-sampling operations at the company's Mozambican ruby project are progressing, according to Gemfields, which plans to hold its first ruby auction in about one year from now. The core infrastructure is largely established and the miner and its partner have stepped up security at the property to reduce illegal mining. Primary stage mining and processing equipment is on site and operational. A pilot and semi-mobile ore processing plant has been designed, fabricated and commissioned and continues to test the characteristics of the ore.
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Dominion Revises Rough Forecast Higher
Dominion Diamond Corporation revised its production forecast at the Diavik diamond in Canada up 11 percent to 6.6 million carats for 2013. The increase was attributed to processing more of Diavik's stockpiled ore, with Dominion Diamond adding that further revisions may be forthcoming in June.
A new mine plan and budget for the company's recently acquired Ekati diamond mine is currently under review, but Dominion foresees production of approximately 1 million carats in 2013.
Mine production follows the calendar year, but Dominion Diamond is currently in its fiscal year 2014 and it expects rough diamond sales to reach $730 million, with $365 million each worth of revenue coming from the 40 percent share of Diavik and the 80 percent share of Ekati.
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STATS
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Hong Kong
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1Q $Mil. |
%Chng. |
| Polished imports |
$4,485 |
4% |
| Polished exports |
$2,962 |
-10% |
| Net imports |
$1,523 |
49% |
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| Rough imports |
$465 |
45% |
| Rough exports |
$696 |
61% |
| Net imports |
($231) |
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| Net diamond account |
$1,292 |
42% |
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Belgium
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Apr. $Mil. |
%Chng. |
YTD $Mil. |
%Chng. |
| Polished exports |
$1,157 |
23% |
$4,506 |
0% |
| Polished imports |
$1,009 |
8% |
$4,227 |
-9% |
| Net exports |
$147 |
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$279 |
116% |
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| Rough imports |
$1,422 |
38% |
$4,877 |
8% |
| Rough exports |
$1,528 |
28% |
$5,111 |
6% |
| Net imports |
($105) |
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($234) |
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| Net diamond account |
$253 |
42% |
$513 |
300% |
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ECONWATCH
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Diamond Industry Stock Report
As of noon in New York, U.S. shares were mostly higher this week with Zale (+15%) pulling ahead. European shares were all higher led by Richemont (+12%), but Indian shares were mainly lower as Winsome (-28%) and Classic (-28%) fell the most. Mining shares were mixed with Rockwell (+18%) and Firestone (+20%) leading gains and Anglo and Rio Tinto (-6%) lower. View the extended stock report.
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May 17 Open |
May 9 |
Chng. |
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| $1 = Euro |
0.780 |
0.770 |
0.010 |
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| $1 = Rupee |
54.89 |
54.29 |
0.6 |
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| $1 = Israel Shekel |
3.67 |
3.55 |
0.12 |
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| $1 = Rand |
9.39 |
9.03 |
0.36 |
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| $1 = Canadian Dollar |
1.03 |
1.01 |
0.02 |
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| Precious Metals |
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| Gold |
$1,360.20 |
$1,456.40 |
-$96.20 |
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| Platinum |
$1,451.00 |
$1,502.00 |
-$51.00 |
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| Stock Indexes |
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Chng. |
| BSE |
20,286.12 |
19,939.04 |
347.08 |
1.7% |
| Dow Jones |
15,289.24 |
15,065.14 |
224.10 |
1.5% |
| FTSE |
6,725.38 |
6,592.74 |
132.64 |
2.0% |
| Hang Seng |
23,082.68 |
23,211.48 |
-128.80 |
-0.6% |
| S&P 500 |
1,658.15 |
1,625.43 |
32.72 |
2.0% |
| Yahoo! Jewelry |
1,022.61 |
1,225.57 |
-202.96 |
-16.6% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Summer holidays are limiting activity. Markets are surprised by De Beers increase (4 to 5 percent) in rough. Shortages of goods exist, especially for SI and lower categories.
Read the full report.
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