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RAPAPORT NEWS SERVICE | August 18, 2016 |
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Rapaport Weekly Market Comment August 18, 2016

Diamond markets quiet and conservative. Buyers selective and price sensitive. Dealers hoping Sept. Hong Kong show will stimulate stronger 4Q polished trading. Chinese consumer confidence stable but Hong Kong luxury continues to slide. Polished suppliers under pressure with rising inventory and tight liquidity. Israel’s FIBI bank raises collateral requirements for diamond loans. Steady demand for 1 to 2.99 ct., D-I, SI1-I2 but VS+ softening. Stars and melee weak with sluggish demand and concerns about synthetics. Titan 1Q sales +4% to $416M, profit -16% to $19M. Gem Diamonds 1H revenue -8% to $109M, loss of $16M vs. profit of $26M. Botswana 2Q rough exports +16% to $980M.

RapNet Data: August 18
Diamonds 1,239,730
Value $7,867,352,662
Carats 1,323,398
Average Discount -30.24%

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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  The 'diamond' engine of growth has run out of steam.

Economists Keith Jefferis and Sethunya Sejoe of Econsult on the future of Botswana's diamond trade

United States: Slight trading improvement but polished buyers in summer mode. Demand selective with lower prices spurring buyer interest

Belgium: Market quiet with bourse services closed until August 22

Israel: Very little activity with the Israel Diamond Exchange closed for summer vacation until August 28

India: Slow trading and weak sentiment. Dealers preparing for Hong Kong show. Polished inventory levels high as manufacturing continues but demand slowed in the past few months

Hong Kong: Polished trading sluggish with some improvement as dealers prepare for the September show. Smaller suppliers discounting to maintain liquidity

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NY Firm to Launch Diamond Industry Lending

Excelsior Capital Ventures will start lending to diamond and jewelry companies on October 3, aiming to fill an estimated $6 billion liquidity shortfall within the trade. The New York-based firm plans to co-lend with major banks that are already in the diamond sector and grow its exposure to $1.5 billion by 2019. Excelsior will loan up to $20 million to each borrower against diamond and precious-metal inventories as collateral.

Israeli Bank Tightens Lending Terms

The Israel Diamond Exchange (IDE) pledged to contest a decision by First International Bank of Israel (FIBI) to tighten its lending standards for the trade. FIBI raised collateral requirements for the diamond industry, prompting IDE president Yoram Dvash to assure bourse members his team will lobby state authorities to persuade the bank to retreat. The IDE has set up a committee to that effect and will hold an emergency meeting after its members return from summer vacation.

India’s Jewelers Applaud Simpler Tax System

India’s jewelry industry welcomed the goods and services tax (GST) passed by parliament this month even as there remain concerns about its implementation. GST is expected to be adopted on April 1, 2017, the start of India’s financial year, and will consolidate several payments that are made currently into just one charge. The new system will free up the movement of goods, said G.V. Sreedhar, chairman of the All India Gems & Jewellery Trade Federation.

Blue Diamonds Buoy Fancy Color Prices

Fancy color diamond prices edged up 0.4% in the second quarter due to a notable increase in demand for blues and pinks, according to the Fancy Color Research Foundation (FCRF). Blue diamond prices rose 1.1% and pinks increased 0.7%, offsetting a 0.5% decline in fancy yellow prices. Fancy vivid blue diamond prices jumped 8.6%.

U.S. Jewelry Store Sales Decline

U.S. specialty jewelry store sales fell 2% to $2.2 billion in June, according to the U.S. Census Bureau. The decline contrasts with growth in previous months as sales increased 1% in the first half of the year. Sales have been buoyed by higher prices as the U.S. consumer price index (CPI) for jewelry rose 4% in July from a year earlier, according to the Bureau of Labor Statistics. The index was little changed compared to June, while the CPI for watches rose 2% sequentially.

Macy's Shutting 100 Stores

Macy’s will close 100 of its 728 stores in early 2017 to focus on better-performing outlets and strengthen its digital business. While the stores slated for closure generate $1 billion in annual sales, their profitability declined in recent years and the return on investment is no longer adequate, the company said. Macy’s sales slipped 4% to $5.87 billion in the second fiscal quarter ending July 30, while profit plunged 95% to $11 million.

Titan Sales Sluggish on ‘Poor’ Wedding Season

Titan Company’s revenue increased 4% to $415.9 million (INR 27.83 billion) in the first fiscal quarter ending June 30. Growth was slower than expected as the Bangalore-based jeweler said sales were diminished by a disappointing wedding season and the recent rise in gold prices. Jewelry sales grew 3% to $319.6 million, while profit dropped 16% to $18.9 million.

Chow Tai Fook Unveils ‘4Ts’

Chow Tai Fook launched its ‘4Ts’ campaign enabling customers to track the journey of a diamond from its source. The ‘Ts’ stand for “traceable, transparent, truthful and thoughtful” and are being pitched by the Hong Kong jeweler as a new industry standard. Chow Tai Fook also developed patented technology that enables it to inscribe on each diamond a unique serial number called the ‘T mark.’ The inscription will be applied to most of its diamonds starting from 0.15 carats, SI clarity and K color.

Mining Outlook Weighing on Botswana Growth

Botswana’s gross domestic product contracted 0.2% in the 12 months to March, reflecting a 21% drop in mining production, the Bank of Botswana said. The downward trend comes as rough diamond exports declined 1.8% to $1.8 billion in the first half of 2016, despite increasing 16% in the second quarter. The shaky outlook for mining means Botswana cannot rely on diamonds for economic growth, warned economists Keith Jefferis and Sethunya Sejoe of Gaborone-based consultancy Econsult.

Gem Diamonds Slides to 1H Loss

Gem Diamonds reported a loss in the first half of 2016 due to a $40 million impairment charge related to downsizing operations at the Ghaghoo mine in Botswana. Production at Ghaghoo has been cut to 300,000 tonnes per year, from an earlier plan of 720,000 tonnes, due to weak market conditions. The miner made a loss of $15.9 million in the six month period versus a profit of $25.6 million the previous year. Revenue dropped 7.5% to 109.1 million.

First Gahcho Kué Sale Slated for 4Q

Mountain Province Diamonds will hold its first sale of rough from the Gahcho Kué mine in Canada in the fourth quarter. Sales will then take place every five weeks, the company said. The mine, which is 51% owned by De Beers and the rest by Mountain Province, is on track to achieve commercial production in January 2017 and is expected to yield 4.5 million carats a year over a 12-year mine life.

ALROSA Joins Responsible Jewellery Council

ALROSA has signed up for the Responsible Jewellery Council (RJC), implying it will undergo an independent audit of its operations within two years to gain RJC certification. The appraisal covers finance and legal compliance, as well as ethical criteria such as anti-corruption measures, human rights, labor conditions, social responsibility and environmental protection.

Young Diamantaires Group Gaining Momentum

A new initiative to encourage younger diamantaires’ involvement in the industry is gaining traction ahead of its first major networking event in September. The ‘Young Diamantaires’ project grew out of a need to get trade members aged below 45 involved in the World Federation of Diamond Bourses (WFDB). An informal meeting was held in May at the World Diamond Congress in Dubai and a social gathering has been scheduled for September 15 during the Hong Kong Jewellery and Gem Fair.

Diamond Miners Appoint Key Executives

De Beers appointed Nigel Simson (pictured) senior vice-president of its product planning operation at Global Sightholder Sales (GSS). The new unit will ensure products and services are more tailored to client needs. Bernard Bradley from Volvo Car Group will replace Simson as senior VP of GSS. In other moves, Dominion Diamond Corp. appointed former De Beers executive Tim Dabson and mergers and acquisitions specialist Trudy Curran to its board. Pangolin Diamonds Corp., a Botswana-focused exploration company, hired former De Beers CEO Gareth Penny as non-executive chairman.

Gold Jewelry Demand Declines

Global demand for gold jewelry dropped 9% to $17.98 billion in the second quarter, according to the World Gold Council (WGC). By volume, demand slumped 14% to 444.1 tonnes. Demand in the first half sank to $36.3 billion, its lowest first-half level since 2010. The decline was driven by weak consumer sentiment in China and the Middle East while gold prices rallied during the period, the WGC said.

Diamond Grower Scio Widens Losses

Scio Diamond Technology recorded a loss of $1.3 million in the first fiscal quarter, reflecting a 44% decline from a year earlier. The lab-grown diamond producer cautioned its future remains uncertain even as revenue advanced 7.5% to $185,061 during the period. The effects of a water leak at its factory in December, and other risks associated with being a new business, “raise substantial doubt about the company’s ability to continue as a going concern,” management said.

Diamond Industry Stock Report

Macy's (+19%) led rallying U.S. retail stocks this week on news it is streamlining its bricks-and-mortar business. JCPenney (+17.5%) also unveiled a revamped strategy and saw its share price climb, while strong results lifted Kohl's (+19%). Mining stocks were more mixed, led by Rockwell Diamonds (+10%), which continued its recent upward trend.

View the detailed industry stock report

  Aug 18 (12:04 GMT) Aug 11 (12:04 GMT) Chng.  
$1 = Euro 0.88 0.90 -0.01  
$1 = Rupee 66.83 66.84 -0.01  
$1 = Israel Shekel 3.78 3.81 -0.03  
$1 = Rand 13.35 13.37 -0.02  
$1 = Canadian Dollar 1.28 1.30 -0.02  
Precious Metals       Chng.
Gold $1,350.45 $1,345.30 $5.15 0.4%
Platinum $1,123.40 $1,171.75 -$48.35 -4.1%
Silver $19.75 $20.16 -$0.41 -2.0%
Stock Indexes       Chng.
BSE 28,123.44 27,859.60 263.84 0.9%
Dow Jones 18,573.94 18,495.66 78.28 0.4%
FTSE 6,858.17 6,845.56 12.61 0.2%
Hang Seng 23,023.16 22,580.55 442.61 2.0%
S&P 500 2,182.22 2,175.49 6.73 0.3%
Yahoo! Jewelry 665.81 657.11 8.70 1.3%

Polished Trading Activity

Slow trading and weak sentiment. Dealers preparing for Hong Kong show. Polished inventory levels high as manufacturing continues but demand slowed in the past few months. Steady demand for commercial-quality, SI2-I2 diamonds. Other areas weak. Slow domestic demand for stars and melee. Rough market stable with lower volumes traded and Russian goods selling at steady premiums during monthly ALROSA sale.

Read the Polished Diamond Trading Report

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