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Market Comments 8/2/2012
Aug 2, 2012 6:00 PM
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All eyes on India as polished suppliers reduce prices while Belgium and Israel are on vacation. Indian market under pressure as weak rupee reduces domestic retail demand and tight credit limits purchasing power and export financing. RapNet Diamond Index (RAPI) for 1 ct. -5.4% in July. Rough markets problematic as De Beers limits supply by overpricing sights. Global 2011 rough production +26% to $14.4B, volume -3% to 124M Cts., average price +31% to $116/ct. Petra’s FY12 production +98% to 2.2M Cts. Gem Diamonds delays development plans as Letšeng 1H sales -22% to $125M, prices -30% to $2,133/Ct. Botswana declines purchase of extra 10% in De Beers as Anglo American to claim 85%. Blue Nile 2Q sales +13% to $91M, profit -44% to $1.6M.
Fancies: Fancy market doing relatively well as significantly lower prices than rounds attract value conscious buyers. Cushions are very hot with supply shortages. Weak demand and lower prices for rounds are encouraging manufacturers to shift production back to fancy shapes. Dealers report fancy shape market for excellent shapes and cuts is better and more profitable than round markets. Large fancies stones relatively stable but sales and liquidity are weak. There are extreme price differentials between excellent/fine and average cut fancy shapes. Fine cut stones may not be available as suppliers tighten discounts and resist lower prices. Square cuts doing better than curves.
Global Markets
United States: Polished trading is subdued, even in the wake of members of the Diamond Dealers Club returning from the July vacation period. Diamond demand is steady, relative to other consumer centers, but the volume of trade remains below the levels experienced one year ago. Demand for cushion-shaped goods is strong and there is stable demand for round- and princess-shaped, commercial-quality stones below SI clarity. Retailers continue to avoid large purchases as they are content to work with existing inventories through the third quarter. Bridal sales are steady, while consumers are opting for more affordable price points.
Belgium: Trading has come to a near standstill with most businesses shut for the summer vacation period as the bourses have closed for most of August (July 30 – August 19). Many Antwerp-based Indian traders are expected to travel to Mumbai in the coming weeks, ahead of the India International Jewellery Show (IIJS) later in the month, as they scout for polished goods from suppliers who may be under pressure. There is an excess of rough inventories in Antwerp, as rough trading slowed in the weeks prior to the current vacation period.
Israel: Trading has slowed as many businesses have taken an early vacation before the Israel Diamond Exchange closes for its annual break next week (August 5 – 16). Some are hoping that prices will stabilize over the break. There are not many desperate “holiday sellers” that are often prevalent at this time of year. Most suppliers have held their prices steady in the past week and are willing to wait out the next few weeks, despite the soft market. Rough trading is weak as dealers are seeing little profitability in De Beers and ALROSA supply.
India: Polished trading is slow as dealers are uncertain about prices. There is steady demand for SI and pique goods, while better-quality stones remain weak. Dealers are also seeing more value in fancy-shaped goods than rounds. Overall market sentiment is weak as domestic consumer confidence has softened, bank lending has tightened and the exchange rate has remained volatile. Similarly, rough trading is slow amid wide price differentials. Manufacturers are concerned about recovering their costs on the resulting polished in the weak market environment. Rough inventories are high and manufacturing remains below capacity.
China: Both wholesale and retail activity remains relatively slow as domestic demand has softened in the past month due to economic uncertainty. Trading is below its 2011 levels and is expected to remain subdued in the coming weeks through the hot summer and as price uncertainty lingers in the soft market.
Hong Kong: Diamond trading remains unusually quiet as dealers express deep concerns about the global economic environment. Buyers are uncertain about prices in the downward-moving market and are holding back from closing deals as they expect prices to further soften. Retail sales continue to fall below 2011 levels as consumer and investor confidence continues to slump.
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