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RAPAPORT NEWS SERVICE | January 19, 2017 |
Industry Retail General Mining EconWatch India
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Rapaport Weekly Market Comment January 19, 2017

Sentiment improving as jewelers begin stock replenishment after mediocre holiday season. Independents outperform majors and online takes significant market share from physical stores. China waking up for ‘Year of the Rooster’ with rising expectations for Jan. 28 Golden Week. China doing much better than Hong Kong. Luk Fook 3Q same-store sales -10% with China +5%, Hong Kong -11%. Rough trading steady with continued weakness in lower-quality goods due to India demonetization problems. Price-sensitive buyers moving to HPHT synthetics instead of lower-quality natural diamonds. India Dec. polished exports +23% to $1.2B, rough imports -5% to $1.5B. Richline buys The Aaron Group.

RapNet Data: January 19
Diamonds 1,244,958
Value $7,454,575,039
Carats 1,327,166
Average Discount -30.36%

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  Whether it was Iceland at the Euros, Leicester City in the Premier League, the West Indies in the T20 World Cup, Sunrisers Hyderabad in the IPL, the Chicago Cubs in the World Series or the Fiji rugby sevens team in the Olympics, it was proven beyond a shadow of a doubt last year that by working together towards a common objective, you can surpass everyone’s expectations of what’s possible.

De Beers CEO Bruce Cleaver urges the industry to work together in a speech to sightholders.

United States: Polished trading improving after quiet holiday period. New York dealers preparing for India Diamond Week in DDC (Jan. 23 to 26)

Belgium: Steady activity with dealers gaining confidence for 2017. U.S. demand stable, Europe weak. Stable demand for 1 ct., G-J, VS-SI, RapSpec A3+ diamonds. 0.30 ct. to 0.40 ct. improving

Israel: Trading quiet. Dealers still assessing holiday season as memo goods are slowly returned. Buyers shifting to lower price points with steady U.S. demand for J-K, SI-I1 goods

India: Trading improving with foreign buyers looking for bargains in Mumbai. Shortages in select categories as fresh post-Diwali supply still in production

Hong Kong: Dealer market quiet as wholesalers close for the Chinese New Year. Some last-minute orders with steady holiday demand for 0.30 to 1 ct. E-J, VVS-SI RapSpec A2+ diamonds

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Diamond Marketing Body Seeks Cash Injection

The Diamond Producers Association (DPA) plans to increase its annual budget to $60 million from $6 million by asking members for bigger contributions, Bloomberg reported. The industry’s marketing body is looking to step up efforts to make diamonds appeal to younger consumers, who are increasingly spending their cash on electronics and restaurants. The DPA will approach members such as De Beers and ALROSA to get them to increase their financial backing, Bloomberg said, citing people familiar with the plans who asked not to be named.

Demonetization Stifles India’s Diamond Imports

India’s rough diamond exports fell 5% to $1.4 billion in December as demonetization damaged local demand, according to data published by the Gem and Jewellery Export Promotion Council. Polished exports rose 23% to $1.48 billion, leaving net polished exports – reflecting the excess of exports over imports – 32% higher at $1.28 million. India’s December net diamond account improved 89% to a deficit of $45 million as total imports exceeded exports.

Richline Acquires The Aaron Group

Richline Group bought jewelry manufacturer The Aaron Group, as the Warren Buffett-owned business continues to drive growth through mergers and acquisitions. The companies did not disclose terms of the deal, which was the fifth acquisition Richline has made in the last 12 months. The Aaron Group, founded in 1950, has grown from its New York roots to a manufacturer with operations in London, Mumbai and China. The takeover will help the company roll out new designs and collections more rapidly, according to Robert Kempler, its president.

NRF Reports Some Holiday Cheer

Holiday retail sales rose 4% driven by an accelerated economic recovery even as certain large chain stores reported lower traffic, according to separate reports from the National Retail Federation (NRF) and MasterCard. The NRF said total U.S. sales increased to $658.3 billion in November and December, with online and non-store sales growing 13% to $122.9 billion. MasterCard also estimated total sales increase at 4% during a slightly shorter period over November 1 to December 24, with online sales jumping 19%.

Trump Protests Disrupt Tiffany Holiday Sales

Tiffany & Co. said holiday sales declined 4% to $483 million in the Americas. The drop resulted from weaker consumer spending and post-election protests outside the jeweler’s flagship New York outlet, which neighbors Trump Tower. Access to the Fifth Avenue store was restricted, with sales slumping 14%, contributing to overall lower U.S. sales. Worldwide group sales increased 0.5% to $966 million amid growth in Asia Pacific and Japan.

Image: Newscast

Forevermark Holiday Sales Outperform Rest of Trade

Forevermark diamond sales in the U.S. jumped 6.4% during the holiday season as product launches and marketing campaigns paid off, De Beers chief executive officer Bruce Cleaver said. Sales of the De Beers-owned brand grew 7.6% in 2016. The figures are based on a representative survey of jewelers that stock Forevermark products. By contrast, total jewelry sales edged up 0.7% in December and increased 0.4% in the full year, according to data from the Mastercard Spending Pulse cited by Cleaver.

China a Bright Spot as Luk Fook Sales Decline

Luk Fook reported same-store sales fell 10% in the third fiscal quarter as a continued decline in its Hong Kong business outweighed improvements in mainland China. Same-store sales slid 11% in Hong Kong versus a 5% increase in mainland China in the three months that ended December 31. The drop in third-quarter sales was slower than that in the previous three months, when same-store sales slumped 37%. The figures only include retail sales at Luk Fook’s self-operated stores.

Birks Holiday Sales Defy U.S. Jewelry Dip

Birks Group reported comparable-store sales grew 11% in a record holiday season for the retailer as the average spend per shopper rose and a greater proportion of store visits translated into purchases. Comparable-store sales jumped 16% in the U.S. and rose 3% in Canada between October 30 and December 31, the jeweler said. All figures were reported at constant exchange rates. The group’s stronger revenues defy an otherwise disappointing holiday season for U.S. bricks-and-mortar jewelry retailers.

Image: Dllu

Rio Tinto Raises Diamond Output

Rio Tinto’s rough-diamond production grew 4% to 18 million carats in 2016, the lower end of its guidance, as it continued to step up underground operations at its Argyle mine in Australia. Output at Argyle increased 4% to 14 million carats. Production at the Diavik mine in Canada rose by the same proportion, with Rio Tinto's 60% share amounting to 4 million carats. The miner forecast production will rise to between 19 million and 24 million carats in 2017.

Diavik Mine to Escalate Diamond Production

Dominion Diamond Corporation forecast production at the Diavik mine in Canada will increase by up to 14% this year after output rose in 2016. The miner projected rough-diamond recovery of 7.1 million to 7.6 million carats in 2017. Production increased 4% to 6.7 million carats in 2016, but was below the company's forecast. 

DiamondCorp Insolvency Hinges on Wage Deal

DiamondCorp warned it will likely enter insolvency proceedings unless an agreement is reached with the mining union over retrenchment and payment of outstanding wages. The company also announced a share sale to raise $1.2 million (GBP 1 million) to fund the care and maintenance of its Lace mine in South Africa, after operations were suspended because of severe flooding in November. Deloitte & Touche, DiamondCorp's business-rescue practitioner, is in negotiations with the Association of Mineworkers and Construction Union.

ALROSA’s Diamond Resources Decline

ALROSA’s rough diamond resources fell 4% to 1.03 billion carats as at July 1, 2016, the Russia-based miner reported. Back on January 1, 2015, the resources stood at 1.08 billion carats. Both assessments were carried out in accordance with a code outlined by the Joint Ore Reserves Committee (JORC), the Australasian guidelines for reporting mineral resources and ore reserves, according to ALROSA. Mineral reserves, defined as resources whose mining is economically feasible, declined almost 1% to 653 million carats.

Gold Set to Shine on Stronger Asian Demand

The World Gold Council (WGC) predicted gold prices will continue to rise in 2017 as growth in Asia and political uncertainty in the west are expected to support demand. Investment demand in China has grown, outweighing weakness in the jewelry sector, the WGC said. In India, liquidity squeeze resulting from the government’s demonetization policy will impact gold demand in the short term but increased transparency and formalization of the economy will support growth in the long run.

Diamond Tiara Crowns Fellows Auction

U.K.-based Fellows sold $627,000 (GBP 520,000) worth of jewelry at an auction that was 74% sold by lot and 87% sold by value. A brilliant round, 6.43-carat, K-color, VVS2-clarity diamond ring was the most expensive item at the sale, fetching $38,986, or $6,063 per carat. Fellows also auctioned a Victorian tiara featuring 19 to 20 carats of J-L color diamonds with clarity ranging from SI2 to “P1,” which is equivalent to the GIA’s I1 grade. The piece fetched $19,493.

Diamond Industry Stock Report

Birks Group (+15%) stood out among U.S. retailers as its holiday sales outperformed the jewelry market. Tiffany (+2.8%) defied disappointing results. Industry stocks were otherwise roughly stable or lower, with Movado Group (-4%) heading the declines. In the Far East, Chow Tai Fook (+4.3%) and Luk Fook (+2.5%) gained as the latter posted improved China sales data. Indian markets showed signs of recovery, with share-price increases led by Lypsa Gems (+8.2%).

View the detailed industry stock report

  Jan 19, 2017 (13:05 GMT) Jan 12, 2017 (12:53 GMT) Chng.  
$1 = Euro 0.94 0.94 0.00  
$1 = Rupee 68.13 67.97 0.16  
$1 = Israel Shekel 3.81 3.82 -0.01  
$1 = Rand 13.60 13.46 0.14  
$1 = Canadian Dollar 1.33 1.31 0.02  
Precious Metals       Chng.
Gold $1,204.98 $1,204.73 $0.25 0.0%
Platinum $966.35 $986.80 -$20.45 -2.1%
Silver $17.02 $16.92 $0.10 0.6%
Stock Indexes       Chng.
BSE 27,308.60 27,247.16 61.44 0.2%
Dow Jones 19,804.72 19,954.28 -149.56 -0.7%
FTSE 7,212.14 7,285.86 -73.72 -1.0%
Hang Seng 23,049.96 22,829.02 220.94 1.0%
S&P 500 2,271.89 2,275.32 -3.43 -0.2%

Polished Trading Activity

Trading improving with foreign buyers looking for bargains in Mumbai. Shortages in select categories as fresh post-Diwali supply still in production. Rough demand steady as export-focused factories raise production levels. Smaller manufacturers cautious due to liquidity squeeze.

Read the Polished Diamond Trading Report

GIA - Advertiser

Hoover and Strong - Advertiser

Aman Gem - Advertiser

MID - Advertiser

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