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Rapaport Weekly Market Comment July 28, 2016

NY jewelry shows quiet. Better goods stable but market sentiment weak. Dealers cautious ahead of summer vacations in Belgium and Israel. Low expectations for next week’s Mumbai show as gold jewelry sales decline after price surge (+28% in Rupee for 2016). De Beers 1H revenue +8% to $3.3B, underlying earnings +5% to $379M. Petra FY sales +1% to $431M. LVMH 1H jewelry & watch sales +4% to $1.8B. U.S. government guarantees Barclays Bank $125M loan facility for Botswana manufacturing. Chow Tai Fook plans to supply diamonds to U.S. retailers as China jewelry sales slow. Rapaport to offer guaranteed 100% natural, untreated, melee diamonds for sale at August 9-18 auction.

RapNet Data: July 28
Diamonds 1,230,307
Value $7,987,674,845
Carats 1,316,444
Average Discount -30.20%

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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New York & Israel

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  In the midstream, caution in rough diamond buying is expected to prevail, as the supplies bought by diamantaires in the first half of 2016 are gradually converted into polished.

Anglo American, the parent company of De Beers, on the outlook for the diamond industry in the second half of 2016

United States: Focus on NY Jewelry week but activity slow. JA, Luxury and Antique shows more about networking than trading. Jewelers trying to differentiate themselves to profit in weak

Belgium: Polished trading relatively busy with suppliers closing deals before three week vacation (August 1 to 22). Dealers happy to take a break as global trading expected to slow until September

Israel: Polished trading quiet due to summer slowdown and sluggish global demand. Dealers preparing for vacation with Israel Diamond Exchange to close August 15 to 28

India: Polished trading slow. Buyers selective and uncertain about prices. Few foreign buyers in Mumbai as U.S., Israel and Belgium seasonally quiet

Hong Kong: Dealer sentiment mixed with some noting slight improvement this week. Chinese demand stable. Hong Kong retail sluggish

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Rapaport to offer 100% guaranteed natural, untreated, melee diamonds for sale at August 9-18 auction

"Melee diamond markets are under pressure due to the unethical behavior of dealers who mix synthetic diamonds into parcels of natural diamonds. It is vital that we create legitimate markets for natural diamonds by statistically sample testing melee parcels and, where possible and practical, testing all diamonds in a parcel to ensure that buyers have an opportunity to source 100% guaranteed natural untreated diamonds.

"Rapaport Auctions will be providing thousands of carats of sample tested melee (99% tolerance and 1% significance levels) as well as select parcels of 100% tested melee at our upcoming August 9-18 melee auctions. The diamond trade must protect the promise of diamonds and the integrity of its people by separating natural diamonds from synthetics," said Ezriel Rapaport, Director of Rapaport Global Trading.

Selling Emotion to Luxury Consumers

Rapaport News spoke with Tom Heyman, a principle at high-end jeweler Oscar Heyman, about the company’s approach to operating in its niche within the jewelry and luxury space...

Click here to read the interview

U.S. Backs Funding for Botswana Diamond Trade

The U.S. government’s Overseas Private Investment Corporation (OPIC) guaranteed a $125 million loan to Botswana’s diamond manufacturing sector. Barclays Bank of Botswana will provide the loan, which is the first tranche of a broader $250 million OPIC loan-guarantee program for Botswana’s diamond industry. Additional lenders may join the program in the future.

Botswana Beneficiation Still Viable, Says Minister

Diamond beneficiation is still a viable project in Botswana despite lower supply to the country’s manufacturers, Kitso Mokaila, the Minister of Minerals, Energy and Water Resources, told parliament. The number of diamond factories operating in Botswana has fallen to 19 factories employing just 2,000 people as market conditions weakened, Mmegi cited Mokaila as saying. Rough supply to local manufacturers slumped 46% to $502.2 million in 2015 but sales were “off to a good start” this year fetching $343 million in the first four sales, according to Mokaila.

Fischler Elected VP of World Diamond Council

The World Diamond Council (WDC) named Stephane Fischler as its vice-president (VP) to succeed Andrey Polyakov as president in 2018. Fischler (pictured), a partner in Fischler Diamonds and president of the Antwerp World Diamond Centre, is also VP of the International Diamond Council and the Diamond Development Initiative. Ronnie Vanderlinden was reelected treasurer of the WDC for a second term, while Udi Sheintal will remain its corporate secretary.

Jewelers of America Enlists New Directors

Jewelers of America (JA) elected Mike Alexander, a vice-president at Jewelers Mutual Insurance Company (pictured, right), and Ronda Daily, CEO of Bremer Jewelry (left), as board members until 2019. The new directors were voted in at JA’s semi-annual board meeting in New York on July 23, replacing outgoing directors Brian Mann of David Mann, Inc, and Teresa Saldivar of Teresa’s Jewelers.

Chow Tai Fook Targets U.S. Diamond Sales

Chow Tai Fook is looking to supply rough and polished diamonds to U.S. retailers as the jeweler seeks new revenue streams following a sales slump in China and Hong Kong. The jeweler plans to start the enterprise within a year and has set up a team to conduct feasibility studies.

Bulgari Lifts LVMH Jewelry Sales

Jewelry and watch sales at LVMH Moët Hennessy Louis Vuitton increased 4% to $1.77 billion in the first half of 2016. The business unit’s profit from recurring operations was flat at $225.3 million. Growth was driven by the Bulgari brand which “outperformed” the market, while TAG Heuer was also singled out as it gained market share in part due to the success of its 'Connected' smartwatch.

Swiss Watch Exports Continue to Slide

Swiss watch exports fell 16% to $1.66 billion (CHF 1.64 billion) in June, the steepest drop this year. Shipments of precious-metal watches dropped 31% to $497.5 million with all other major categories suffering a decline. Orders from Hong Kong, Switzerland’s largest trade partner for watches, fell 29% to $187.9 million, the 17th consecutive month of decline. The worst-performing price category was the $203 (CHF 200) to $506 (CHF 500) range where exports slid 20%.

India Eases Rules on Controversial Excise Tax

The Indian government relaxed its rules regarding a 1-percent excise duty on jewelry that led to a six-week strike earlier this year. Under the new terms, businesses with revenue of up to $2.2 million (INR 150 million) are exempt from the tax, whereas the previous cut-off was $1.8 million (INR 120 million). The change comes after the government set up a committee to interact with the jewelry trade over the tax.

De Beers Earnings Rise

De Beers reported revenue grew 8% to $3.27 billion and underlying earnings rose 5% to $379 million in the first half of 2016. The miner benefited from stronger rough diamond demand, tighter cost controls and favorable exchange rates. Rough sales jumped 11% to $3.1 billion, spurred by a 29% leap in sales volume which outweighed a 14% drop in average prices. Rough demand improved as manufacturers and dealers replenished inventories that were reduced in the second half of last year, the company said.

Snap Lake Mine up for Sale

De Beers is looking to sell the Snap Lake mine in Canada after suspending operations in December. The company has hired Bank of Montreal to market the asset which has failed to make money since production started in 2008, according to Reuters. In June, De Beers received approval to flood the mine’s tunnels, which would reduce its maintenance costs. The flooding will likely occur in the fourth quarter if no buyer is found.

Petra Sales Rise Despite Depressed Prices

Petra Diamonds revenue climbed 1.4% to $430.9 million in the fiscal year that ended June 30 as increased sales volume outweighed a drop in rough prices. Diamond sales by weight jumped 9% to 3.4 million carats and prices fell 6% during the year. Production jumped 16% to 3.7 million carats, above the company’s upper guidance of 3.65 million carats. Petra expects production to rise to between 4.6 million and 4.8 million carats in fiscal 2017.

Diamcor Earnings Fall Deeper Into the Red

Diamcor Mining reported its net loss plummeted 80% to $4.3 million (CAD 5.6 million) in the fiscal year ending March 31. Sales jumped 52% to $3.5 million (CAD 4.7 million) as plant efficiencies and processing volumes improved. However, operating expenses rose 53% to $3.7 million as it ramped up operations at the Krone-Endora at Venetia project in South Africa.

Sarine Pens Deal with Singapore Retailer

Sarine Technologies struck a deal with Soo Kee Group to provide its digital diamond display equipment at the Singapore-based jeweler’s Love & Co. stores. The ‘Sarine Profile’ technology will be implemented in the LVC Lovemark diamond collection at Love & Co. stores in Singapore and Malaysia, marking the product's first roll out in Asia. The equipment enables jewelers to integrate Sarine’s digital platform to its inventory and communications systems.

RJC, Miners Advance Work on Responsible Jewelry

The Responsible Jewellery Council (RJC) and the Alliance for Responsible Mining (ARM) renewed an agreement to strengthen their collaboration in promoting and facilitating responsible jewelry supply chains. The two organizations said they share objectives to promote responsible precious-metals supply chains and will continue cooperating to ensure their standards and assurance models are “mutually supportive.” They also aligned aspects of their assurance systems.

Pippa Middleton Ring Spurs Asscher Cut Craze

Asscher-cut diamonds have soared in popularity since Pippa Middleton received an engagement ring with the fancy shape, according to 77 Diamonds. Middleton, the Duchess of Cambridge’s younger sister (pictured), got engaged to hedge fund manager James Matthews last weekend. Matthews proposed with an Asscher-cut diamond thought to weigh about 4 carats.

Diamond Industry Stock Report

U.K.-listed miners had a strong week, led by Stellar Diamonds (+35%), which gained from a low base on news of joint ventures in Guinea and Liberia. Anglo American (+6.3%) rose as the miner reported a narrower loss and lower net debt. Mining stocks elsewhere were mixed, with declines headed by True North Gems (-6.3%). LVMH (+8.2%) led European luxury retail stocks following solid results.

View the detailed industry stock report

  July 28 (11:36 GMT) July 21 (13:01 GMT) Chng.  
$1 = Euro 0.90 0.91 -0.01  
$1 = Rupee 67.04 67.18 -0.14  
$1 = Israel Shekel 3.82 3.85 -0.03  
$1 = Rand 14.26 14.29 -0.03  
$1 = Canadian Dollar 1.32 1.31 0.01  
Precious Metals       Chng.
Gold $1,341.95 $1,319.28 $22.67 1.7%
Platinum $1,145.69 $1,082.50 $63.19 5.8%
Silver $20.37 $19.35 $1.02 5.3%
Stock Indexes       Chng.
BSE 28,208.62 27,710.52 498.10 1.8%
Dow Jones 18,472.17 18,595.03 -122.86 -0.7%
FTSE 6,736.61 6,701.39 35.22 0.5%
Hang Seng 22,174.34 22,000.49 173.85 0.8%
S&P 500 2,166.58 2,173.02 -6.44 -0.3%
Yahoo! Jewelry 1,020.52 998.19 22.33 2.2%

Polished Trading Activity

Polished trading slow. Buyers selective and uncertain about prices. Few foreign buyers in Mumbai as U.S., Israel and Belgium seasonally quiet. Steady demand from major U.S. retail programs. Low expectations for IIJS show (August 4 to 8) as gold demand stumbles. Steady demand for 1 ct., G-H, VS-SI, 3X goods. Stars and melee weak amid concerns synthetics will have long-term market impact. Rough demand and manufacturing levels stable.

Read the Polished Diamond Trading Report


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