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RAPAPORT NEWS SERVICE | January 12, 2017   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment January 12, 2017

Diamond demand uncertain as U.S. jewelers report weak holiday sales. Signet disappoints as Nov.-Dec. sales -5% to $1.9B with fewer transactions, higher average price, and technical glitches on ecommerce channel. Mall traffic slow with department stores discounting heavily to attract customers. Macy’s, J.C. Penney jewelry outpaces sluggish overall performance. Rising expectations for Chinese New Year after Chow Tai Fook 3Q retail sales +7% in China, -6% in Hong Kong. Steady rough demand expected at next week’s De Beers sight as manufacturers raise production for 1Q stock replenishment. ALROSA 2016 sales +26% to $4.5B. U.S. Nov. polished imports -2% to $1.6B, exports +25% to $1.7B.

RapNet Data: January 12
Diamonds 1,258,800
Value $7,663,568,584
Carats 1,343,922
Average Discount -29.95%

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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
  Signet’s holiday faced a perfect storm of retail pressure from jewelry-industry trends, competitor promotions, Sterling ecommerce execution, U.K. macro factors and weak mall traffic.

Nomura analyst Simeon Siegel

MARKETS  
 
United States: Polished market stable as dealers return from Christmas break. Diamond trading expected to improve as jewelers replenish stock sold during holiday period

Belgium: Trading quiet as dealers return from vacation. Cautious mood after polished prices softened in December and as banks restrict funding to local traders

Israel: Stable market with steady Far East demand ahead of Chinese New Year season. U.S. demand slow as buyers return from holiday

India: Sentiment weak. Holiday sales to U.S. slower than usual with estimates of small decline. Steady demand for 0.30-1.50 ct., VS1-SI2, RapSpec A3 diamonds but D-F, IF weaker

Hong Kong: Diamond trading slow with manufacturers and wholesalers closing for Chinese New Year holiday. Retail sentiment improving ahead of the Jan. 28 festival with growth in mainland China expected from last year’s low base

Click here for deeper analysis


FIVE-MINUTE INTERVIEW  
 
Undisclosed Synthetics Reaching Epidemic Levels

Joseph Kuzi, director of Diamond Services, warns that undisclosed synthetics are more widespread than the industry realizes. As technology advances and production of lab-grown diamonds increases, the trade must raise its vigilance about the issue if it is to protect the future of the natural diamond industry, Kuzi emphasized in a recent interview with Rapaport News...

Click here to continue reading


INDUSTRY  
 
Sarine Sales Jump Indian Liquidity Hurdle

Sarine Technologies expects fourth-quarter revenue grew significantly as sentiment improved in the Indian diamond manufacturing sector. The company projected sales surpassed $18 million during the final three months of 2016, which would imply a 45% jump from a year ago. Sentiment in India was strong during the quarter despite the impact of demonetization on liquidity levels, Sarine explained.


 
India Approves Diamond-Futures Trading

The Securities and Exchange Board of India (SEBI) gave its in-principle approval to trading in diamond futures. Transactions on the Indian Commodity Exchange (ICEX) are expected to launch in March once certain additional regulatory approvals have been obtained. Investors will be able to trade in three categories of diamond futures: 0.30 carats, 0.50 carats and 1 carat. India’s government gave its go-ahead to the plans in September.


 
Households Unaware of 80% Rise in Jewelry Value

Vintage jewelry gained more than 80% in value in the past decade, with many owners not realizing how much money they are sitting on, U.K.-based auction house Bonhams said. Jewelry from the Art Deco period in the 1920s and 1930s and pieces from the Belle Epoque era from 1890 to 1915 have appreciated 88% since 2006, the company said, citing Art Market Research. Jewelry from the post-war era jumped 70% in value.


 
U.S. Diamond Trade Slows in November

U.S. polished diamond imports slipped 2% to $1.59 billion in November, while polished exports grew 25% to $1.7 billion, government data revealed. Rough imports more than doubled to $72.3 million, while exports jumped to $73.2 million from $19.8 million. The net diamond account was negative $107.9 million compared with positive $248.9 million a year ago, as more diamonds left the country than came in during the period.


RETAIL & WHOLESALE  
 
Ecommerce Gains Leave Retail Stores in the Cold

Initial holiday sales data from across the retail sector pointed to a tough season, with department stores reporting declines due to a shift toward online shopping. Macy’s and J.C. Penney both posted revenue drops but noted jewelry sales were relatively strong. Kohl’s holiday sales also fell. Researchers at RetailNext backed up this verdict, reporting bricks-and-mortar sales fell 10%, while ComScore said online sales jumped 12%.

Image: Kan Wu


 
Signet Reports Bleak Holiday Season

Signet Jewelers’ sales fell 5.1% to $1.94 billion in November and December as the company observed overall weakness in the jewelry market. Ecommerce sales slipped 2.4% because enhancements to Signet’s online selling platform failed to cope with the higher levels of holiday traffic. In-store sales were more in line with the mid-single digit decline seen across the jewelry industry over the holiday, the company said. Signet’s same-store sales fell 4.6% during the period.


 
Richemont Sales Hint at High-End Rebound

Richemont reported sales at its jewelry maisons jumped 9% to $1.86 billion (EUR 1.75 billion) in the third fiscal quarter which included the holiday season. The maisons, which comprise luxury brands Cartier and Van Cleef & Arpels, drove an overall improved performance by the group, while sales at its specialist watchmakers fell 2%. Group revenue advanced 6% to $3.29 billion, with sales in Asia-Pacific rising 10%, while the Americas grew 8% and Europe climbed 3%.


 
Chow Tai Fook Sales Signal China Recovery

Chow Tai Fook said retail sales in mainland China increased 7% in the third fiscal quarter that ended December 31, while same-store sales advanced 4%. However, revenue from Hong Kong and Macau fell 6% with same-store sales down 2%. Gold sales outperformed gem-set jewelry in both regions as gold prices rose during the period. The results signal a turnaround from the double-digit declines reported in the past two years when the jeweler was hit by a slowdown in China's economy and fewer tourist arrivals in Hong Kong.


 
Weak U.S. Sales Inhibit Michael Hill Growth

Australia-based Michael Hill reported group sales increased 5.7% to $240.3 million (AUD 328.1 million) in the first fiscal half ending December 31, despite its sluggish performance in the U.S. Global same-store sales increased 1%. Sales generated at Michael Hill-branded stores in Australia increased 3%, while revenue in Canada jumped 18%. Sales in New Zealand declined 1.3%. However, U.S. sales slid 5.9% as the company attempts to revive growth there under new regional head Brett Halliday.


MINING  
 
ALROSA Sales Rise as Rough Demand Returns

ALROSA’s diamond sales jumped 26% to $4.49 billion in 2016, reflecting a recovery in the rough market. The increase came despite a slowdown in the final two months when India's demonetization policy impacted liquidity for small rough diamonds. ALROSA's December sales totaled $176.3 million, with rough revenue of $173 million and polished sales of $3.3 million. This compares with combined sales of $255.2 million recorded in November.


 
Angola Mine Claims Highest-Value Diamonds

Lucapa Diamond Company claimed its Lulo mine in Angola achieved the highest price per carat for any run-of-mine diamond production in the world in 2016. Sales reached $51 million at an average price of $2,983 per carat, the miner reported. The mine produced 269 ‘special’ rough diamonds, weighing 10.8 carats or more, compared with 86 a year ago. Total diamond output more than doubled to 19,833 carats from 8,394 carats in 2015.


GENERAL  
 
Sotheby’s Combines Luxury Categories

Sotheby’s launched a luxury and lifestyle division uniting its jewelry, watches, wine, cars and ‘experiences’ categories. The auction house appointed seasoned auctioneer Marteen ten Holder managing director of the new unit. Ten Holder (pictured) brings experience in each of the categories to the role. He will move to New York from London, where he was most recently managing director of Sotheby’s operations in Europe, the Middle East, India and Africa.


 
Dhamani Selected to Retail Argyle Pink Diamonds

Rio Tinto named Dubai-based jeweler Dhamani to its exclusive list of ‘select ateliers’ for Argyle pink diamonds, granting it access to the miner’s supply of rare stones. Dhamani launched a new line of pink-diamond jewelry, the DPINK Collection, which mostly comprise diamonds from Rio Tinto's Argyle mine in Australia. ‘Select ateliers’ are companies that Rio Tinto has entrusted with retailing Argyle pink diamonds not sold through Rio Tinto’s main annual tender.


 
MJSA Raises the Bar for Bespoke Jewelry

Manufacturing Jewelers & Suppliers of America (MJSA) has launched a program to improve the consumer experience when buying custom-made jewelry. The group set up the Council of Custom Jewelers as part of the initiative to advance the art of custom-jewelry design and consumers’ appreciation of it. MJSA will also establish a basic definition of custom jewelry and promote a system for classifying custom-designed projects.


ECONWATCH  
 
Diamond Industry Stock Report

Disappointing U.S. holiday sales prompted heavy losses among retail stocks, with Kohl's (-21%) enduring the biggest slide. JCPenney (-17%), Macy's (-16%) and Signet (-11%) also fell sharply after sluggish performances during the crucial season. Hong Kong retail gained on improved results from Chow Tai Fook (+6%) and signs of a recovery in the Chinese market. It was also a relatively strong week for European retail stocks as Richemont (+17%) reported promising results.

View the detailed industry stock report


  Jan 12, 2017 (12:53 GMT) Jan 5, 2017 (13:41 GMT) Chng.  
$1 = Euro 0.94 0.95 -0.01  
$1 = Rupee 67.97 67.89 0.08  
$1 = Israel Shekel 3.82 3.85 -0.03  
$1 = Rand 13.46 13.62 -0.16  
$1 = Canadian Dollar 1.31 1.33 -0.02  
         
Precious Metals       Chng.
Gold $1,204.73 $1,173.83 $30.90 2.6%
Platinum $986.80 $958.20 $28.60 3.0%
Silver $16.92 $16.57 $0.35 2.1%
         
Stock Indexes       Chng.
BSE 27,247.16 26,878.24 368.92 1.4%
Dow Jones 19,954.28 19,942.16 12.12 0.1%
FTSE 7,285.86 7,200.59 85.27 1.2%
Hang Seng 22,829.02 22,456.69 372.33 1.7%
S&P 500 2,275.32 2,270.75 4.57 0.2%


INDIA MARKET REPORT  
 
Polished Trading Activity

Stable market with steady Far East demand ahead of Chinese New Year season. U.S. demand slow as buyers return from holiday. Domestic market still feeling effect of demonetization. Major retailers with organized credit and electronic payment facilities doing relatively well. Large manufacturers raising production as U.S. post-holiday orders begin. Small factories feeling liquidity squeeze remain closed. Steady production of dossiers and 1 ct., while manufacturing of small goods is slow.

Read the Polished Diamond Trading Report






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