|
|
Rapaport TradeWire September 4, 2015
Sep 3, 2015 6:00 PM
By Rapaport
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| |
|
Rapaport Weekly Market Comment
September 4, 2015
|
|
Indian dealer market illiquid with no one buying for inventory. Dealers with money waiting for lower prices. Some action in Israel during Diamond Week but ~$15M insolvencies creating concern. Dubai reports ~$136M retailer insolvency with similar failure expected in China. Low expectations for HK show. Fair to good NY demand for large stones but stock market plunge reducing U.S. consumer confidence. Aug. RAPI for 0.30ct. -1.7%, 1ct. -0.9%. Rough prices still too high with no profits for cutters. Rapaport estimates reasonable profitability would require an additional 20% rough price drop. Botswana budget pressured by falling rough sales. ALROSA 1H revenue +26% to $2B, profit +105% to $726M.
|
|
RapNet Data: September 3
|
| Diamonds |
|
1,385,102 |
| Value |
$8,774,455,627 |
| Carats |
|
1,409,371 |
| Average Discount |
-26.20% |
www.rapnet.com
|
|
 |
| The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category. |
|
|
|
|
Get Current Price List | Subscribe to Rapaport | Join RapNet |
|
| |
QUOTE OF THE WEEK
We see risks for an even more pronounced deficit because of a prolonged downturn in world diamond demand, specifically tied to China's economic rebalancing and lower luxury spending.
Moody's Investors Service | in its recent analysis of Botswana's reduced 2015 GDP forecast.
|
|
|
|
MARKETS
|
|
|
|
|
| |
United States: New York trading is stable as the U.S. remains the best market for diamonds. Still, dealers are cautious as buyers are making offers at lower prices.
Belgium: Activity in Antwerp’s diamond district remains quiet with dealers waiting to see how the market evolves in the days leading up to the Hong Kong Gem and Jewellery Fair that begins on September 16.
Hong Kong: The diamond and jewelry market is very quiet with a reported slowdown in tourist arrivals affecting sentiment. Luxury retailers continue to post sales declines and some are reportedly closing or relocating as their turnover doesn’t justify the high rental costs in the city.
India: The market is slow and dealers are very cautious due to reports of bankruptcies in Israel, Dubai and China. Suppliers are insisting on cash deals as buyers are delaying payment.
Israel: The market received a much-needed lift during this week’s International Diamond Week at the bourse. Dealers noted that the event was more a strong networking opportunity with some sales taking place.
Click here to continue reading
|
|
|
|
|
|
|
INSIGHTS
|
|
|
|
|
| |
A Sustained Diamond Supply Surplus
Don’t be fooled by the pitch that touts shortage as a reason for investors to plough dollars into the diamond mining sector. In fact, like many other commodities in the world today, the diamond industry is also drowning in a supply glut. What’s worse, amid all the talk of weaker rough sales, is that global production actually grew in the first half and looks set to continue increasing for the rest of 2015.
Click here to continue reading
|
|
|
|
INDUSTRY
|
|
|
|
|
| |
Sotheby’s to Host Magnificent Jewels Sale
Sotheby’s will feature a selection
of top-quality diamonds, natural colored gemstones and watches at its Magnificent
Jewels and Jadeite sale, to be held on October 7 in Hong Kong.
Among the items to be offered are a
41.65-carat internally flawless fancy vivid yellow diamond priced at $1.9
million and a 10.62-carat unheated Burmese ruby “Panther” ring by Cartier.
The company’s October 6 sale of
important watches will include a limited-edition Harry Winston white-gold
wristwatch priced at $100,000.
|
| |
Movado’s Sales Grow
Movado Group Inc. reported that its
revenue increased by 1.4% year on year to $145.6 million in its second fiscal
quarter of 2016, while its net sales grew 6.1%.
Movado attributed this gain to its channel
and product mix, selective price increases and certain sourcing improvements.
The company is maintaining its current
guidance for fiscal 2016, when it expects net sales to range between $590
million and $600 million.
|
| |
GIA to Open Synthetic Research Center
GIA expects to open a diamond
synthesis facility in New Jersey in January, Tom Moses, GIA’s executive vice
president and chief laboratory and research officer, told participants at
Israel’s International Diamond Week.
The site is planned to be a research facility for GIA gemologists to analyze
synthetic diamonds and practices, Moses said. The group is also expanding its
Israel operations in order to grade a larger volume of diamonds.
Telling event participants that synthetic, lab-grown diamonds are now a fact of
life for the industry, Moses observed that there has been significant
technological progress in CVD (chemical vapor deposition) in recent
years. While he expects that CVD diamonds will be primarily commercial, he
also predicted some products will reach the jewelry industry.
|
| |
New Sightholder KGK Opens Botswana Factory
Indian diamond cutting and polishing firm KGK Diamonds has opened operations in Gaborone, Botswana. The unit is expected to employ as many as 150 staff and will cut and polish diamonds valued at an average $1.5 million each month, according to a company announcement.
The company is De Beers’ 22nd local sightholder, replacing Teemane, which closed early this year. At its peak, the local cutting and polishing industry employed about 3,700 workers.
KGK Group chairman, Navrattan Kothari said the company plans “to increase our staff complement from 90 to 150 in the next year. The current turmoil in the diamond industry is a temporary phase, which will pass soon." KGK is listed on De Beers’ website as a company operating in 14 countries over four continents, with over a century of experience in the diamond industry.
|
| |
IDE Launches International Diamond Week
The Israel Diamond Exchange (IDE)
officially opened its fifth International Diamond Week, featuring more than 300
Israeli exhibitors and hundreds of buyers and exhibitors from 20 countries,
including Belgium, India, Turkey, China, the U.S., Russia and Switzerland.
Attendees included participants
from the Diamond Dealers Club (DDC) of New York, the Antwerp Diamond Bourse (ADB)
and Mumbai’s Bharat Diamond Bourse.
Participating in the opening
ceremony were IDE president Shmuel Schnitzer; Israel Diamond Manufacturers Association
president Kobi Korn; David Lasher, director of the DDC of New York and Marcel
Pruwer from the ADB.
|
| |
Burgled Hatton Garden Firm to Close
The
London safe deposit box company that was robbed over Easter weekend has gone
into liquidation, the U.K.’s Sky News reported. Hatton Garden Safe Deposit
issued a statement that it had gone into creditors' voluntary liquidation on
August 24, after trade slumped in the wake of the theft.
The burglars broke into the vault at the company’s office, located in the heart
of London's jewelry quarter, and ransacked 73 safety deposit boxes, stealing
property believed to be worth millions.
The winding up of the firm will be led by accounting firm SPW's Stella Davis
and Harold Sorsky.
|
| |
Lazare Kaplan Postpones SEC Filing Again
Lazare
Kaplan International has delayed filing its annual fiscal 2015 report with the
U.S. Securities and Exchange Commission (SEC).
In
its recent notice to the SEC, the New York-based diamond manufacturer again
claimed it “has been unable to resolve a material uncertainty concerning a) the
collectability and recovery of certain assets, and b) the company’s potential
obligations under certain lines of credit and a guaranty.” Earlier this year,
Lazare Kaplan reiterated its intention to file official quarterly and annual
financial reports dating back to May 31, 2009.
Lazare
Kaplan also denied that any amount was currently due or owed to Antwerp Diamond
Bank (ADB) under a $45 million facility or that ADB had grounds for further
action.
In the U.S. court system, Lazare Kaplan is seeking $500 million in damages from
ADB and the bank’s parent company, KBC Bank, under the Racketeer Influenced and
Corrupt Organizations Act (RICO) and state law. Lazare Kaplan alleges that the
banks engaged in money laundering and the theft of over $135 million from the
sale of diamonds belonging to the company and its affiliates.
|
| |
HRD to Introduce Melee Screening at Hong Kong Show
HRD
Antwerp announced that it will introduce an automated melee screening device,
known as M-Screen, on September 17 at the Hong Kong Jewellery & Gem Fair.
The
machine was developed in a joint venture with Belgium’s Scientific and
Technical Research Center for Diamonds and is said to provide “a super-fast table-top
automatic melee screener” for commercial use.
|
|
|
|
RETAIL & WHOLESALE
|
|
|
|
|
| |
Signet’s Shares Rally
Shares of Signet Jewelers jumped
more than 10% after the jewelry retailer surpassed expectations in its second-quarter
earnings report. Signet reported that its sales grew 15% to $1.4 billion,
driven by its acquisition of Zale Corporation, which took place halfway through
the same quarter of last year.
“With the flurry of global market
noise, we believe a market share leader in an e-commerce-protected operation,
focusing on a U.S.-centric customer, is a very compelling proposition,” wrote
Simeon Segal, an analyst at Nomura, reiterating his buy recommendation for the
shares. “We continue to believe Signet remains one of the most compelling
growth stories in retail and suggest accumulating at current levels.”
Mark Light, Signet’s CEO, explained
that lower gold and platinum prices had a greater impact on lowering costs than
recent reductions in diamond prices. He noted that the polished diamonds Signet
sources have been less affected than VS-clarity and better diamonds, which are
popular in Asian and Middle Eastern markets.
|
| |
Tiffany’s Sales Flat as Profit Falls
Tiffany & Co. reported that its
second-quarter sales were flat at $991 million year on year, while profit was
down 16% to $105 million. The retailer’s comparable-store sales increased by 7%,
beating analysts’ estimates of a 3.5% gain.
A strong dollar has trimmed the
value of Tiffany's sales outside the U.S. and has discouraged foreign tourists
from making purchases in its American stores.
“We entered this year expecting
translation- and tourism-related pressures on sales and earnings from the
exceptionally strong U.S. dollar, as well as challenging economic conditions in
certain markets,” said CEO Frederic Cumenal. “While the adverse effects from
the strong dollar have been even more significant than initially expected, we
met our overall expectations in the first half of the year.”
Tiffany now expects its net
earnings to fall between 2% and 5% for the full year, with business regaining
momentum in the fourth quarter.
|
| |
Australia’s Lovisa Plans Global Expansion
Jewelry retailer Lovisa said its
overseas stores are becoming its top outlets and that it has plans for further
global expansion, according to The
Australian. Australia is its main market, but Lovisa has closed 20 local
stores there this year, while expanding almost all of its offshore operations.
"The overseas markets
generally enjoy lower costs of doing business and in fiscal year 2015, 11 of
our top 20 stores ranked by store contribution were outside Australia,"
the company said. Stores will be opened in all of its markets, and research and
negotiations are being undertaken in new countries.
Lovisa recorded a profit of $17.6
million for fiscal 2015, exceeding its own projections, and expects additional
growth in 2016.
|
| |
Dubai Jeweler Atlas Defaults on $136M in Loans
Atlas Jewellery, a Dubai-based gold
and jewelry retailer, has defaulted on loans worth about $136.2 million (500
million dirhams).
The defaults are said to affect at
least 15 banks, including two Indian lenders. The banks involved have met as a
group and will meet again to consider joint action, Reuters reported.
Atlas, which bills itself as
"trusted by millions," has more than 50 branches across the Gulf and
in India.
|
| |
India’s Flipkart, PC Jeweller Partner
E-commerce retailer
Flipkart is joining forces with jewelry retailer PC Jeweller to create an
online shopping platform, The Hindu
reported.
The focus of the platform will be on replicating shoppers’ brick-and-mortar
experience at a large-format PC Jeweller showroom.
|
| |
Hong Kong's Plukka Offers $7M IPO
Hong
Kong jeweler Plukka will list its shares in Australia as it strives to raise
$7.1 million (AU 10 million) to expand into the U.S., according to CEO Joanne
Ooi.
Plukka is set to be listed on the Australian Stock Exchange in October, Ooi
told CNBC. Ooi founded Pukka in 2011, offering a catalogue of made-to-order
lines. The brand transacted its business online for its first three years of
operation, opening a single retail outlet in Hong Kong’s Landmark Atrium
earlier this year.
Unlike
many Hong Kong-based design and retail businesses, the company is targeting
expansion in the west, rather than Mainland China, with Ooi describing U.S.
expansion as “the most economically efficient mode of branding and marketing a
global luxury brand.”
|
|
|
|
MINING
|
|
|
|
|
| |
ALROSA May Cut Diamond Prices
Russian
diamond miner ALROSA may cut prices again in the second half of the year after
already lowering them by 6% in the first half, chief financial officer Igor
Kulichik said during a conference call with investors.
Customers
cancelled half of the orders they placed at ALROSA's trading session in July
and the company is considering another price cut due to the current low demand.
During the conference call, Kulichik said the miner was stockpiling an
increased quantity of rough diamonds, rather than curbing production.
“Cutting
production leads to a (relative) rise in costs, so we better grow the stock,”
Kulichik explained, adding that the higher-than-usual cancellation rate
reflected a wider trend of falling diamond sales.
ALROSA's
diamond inventory has grown from 14 million carats at the beginning of the year
to 17 million carats.
|
| |
ALROSA’s Sales Up
Russian miner ALROSA reported that
its sales rose 20% to $875.8 million (RUB 57.3 billion) in the second quarter, versus
the comparable period of last year.
For the first half of the year, the
miner reported that its revenue increased by 26% to $2.02 billion (RUB 131.9
billion).
CEO Andrey Zharkov commented on the
company’s website that “The FX market environment continues to have a positive
impact on ALROSA’s financial results. The company notes a steady increase in
demand for diamond jewelry in the U.S. The less active diamond jewelry market
in Asia is a result of deterioration of the macroeconomic situation in the
region. ALROSA's forecast for rough diamond demand is a conservative one,
though the market is expected to pick up by year end 2015.”
|
| |
Mwana Africa to Raise $5.6M for Klipspringer Mine
Miner
Mwana Africa PLC said it is planning to raise $5.6 million (GBP 3.67 million)
in an open offer to fund back work at the Klipspringer diamond mine in South
Africa, Alliance News reported.
Mwana will issue 367.6 million shares at 1 pence per share in the open offer.
Under the terms of the issuance, current shareholders will be able to buy 1
open-offer share for every 3,802 ordinary shares they already hold.
|
| |
UN Highlights Cameroon's Role in Illicit Diamond Trade
Illicit
diamond trafficking from the Central African Republic (CAR) into neighboring
Cameroon is helping to finance the continuation of a nearly three-year
conflict, an expert panel that monitors UN sanctions revealed in a confidential
report.
Diamond exports from CAR were banned in May 2013 by the Kimberley Process,
which represents 81 countries, including the U.S., the European Union, Russia,
China and all major diamond-producing nations.
In its interim report to the CAR sanctions committee, the UN Security Council's
panel said the illicit diamond trade is still funding major players in the
conflict and increasingly involves neighboring countries, such as Cameroon and
Chad.
The report does not directly implicate Cameroon authorities in illicit activity,
however.
|
|
|
|
GENERAL
|
|
|
|
|
| |
U.S.-Belgian Businessman Arrested for Role in ‘Blood Diamond’ Trade
American and Belgian citizen Michel
Desaedeleer was arrested in Spain last week on a European arrest warrant for
his alleged involvement in the international crimes of pillaging “blood
diamonds” and enslaving civilians, according to Geneva-based NGO Civitas
Maxima.
Several citizens of Sierra Leone
who were victims of enslavement during the civil war filed a criminal complaint
in Brussels in January 2011 against Desaedeleer, who lives in the U.S.,
according to Civitas Maxima, which has been working to document crimes and
assist the victims.
During the civil war, the Revolutionary
United Front (RUF) used civilians as slaves to mine diamond pits in Sierra
Leone’s Kono district. The proceeds of their forced labor were brought to Charles
Taylor in Monrovia, Liberia and then sold on the international market.
Desaedeleer’s arrest marks the
first time a businessman has been arrested for his alleged involvement in these
international crimes.
|
| |
ALROSA Diamonds Go Missing at Gokhran
Severalmaz, ALROSA’s mining unit, said
that some of the 150,000 carats of diamonds it entrusted to Gokhran, the Russia’s
State Precious Metals and Gems Repository, for sorting were swapped with
cheaper, inferior-quality diamonds, according to Kommersant, which cited unidentified individuals familiar with the
situation. The missing lot reportedly includes four large, uncut diamonds.
The Russian Finance Ministry, together
with Severalmaz and Gokhran, has set up a special panel to investigate the
matter, according to the report.
|
| |
Moody's Predicts Wider Botswana Deficit
Botswana's budget deficit for
fiscal 2016 may be much wider than projected due to the slowdown in the diamond
market, credit rating agency Moody’s said. Botswana's Finance Ministry previously
forecasted a deficit of $393 million (4.03 billion pula), or 2.6% of its gross
domestic product, for the fiscal year.
"We see risks for an even more
pronounced deficit because of a prolonged downturn in world diamond demand,
specifically tied to China's economic rebalancing and lower luxury spending,"
the rating agency explained.
Moody's also said that the lower
diamond revenues would increase existing pressures on the government’s budget,
such as drought relief expenditures and higher-than-budgeted outlays on public sector
wages.
Diamonds account for almost 40% of
Botswana's budgetary revenue and around 85% of its exports.
|
| |
BDI: ISO’s New CVD Guidelines Fail to Uphold Standards
The
International Organisation for Standardisation's (ISO) new guidelines for
lab-grown diamonds don’t meet the organization’s traditional standards or
reflect best industry practices, according to the Better Diamond Initiative
(BDI).
The new ISO standard, 18323:2015 Jewellery – Consumer confidence in the diamond
industry, defines the nomenclature and terminologies that should be used for
lab-grown diamonds, treated diamonds and earth-mined diamonds.
However, BDI’s founder, Vyom Shah, stated at BDI’s website that ISO “fails to
follow its own guidelines in drafting the standard, as it undermines its
objectives listed above, for both consumer and trade.
“For
consumers, the restricted use of the term ‘synthetic’ to refer to lab-grown
diamonds will spread confusion and deception, leading into believing that they
are fake diamonds, like cubic zirconia, moissanite, etc., which is not true,”
Shah’s statement continued. “Lab-grown diamonds have emerged as a new choice
for ethical and conflict-free diamonds, but the perception that they are fake
will eliminate them as a choice for consumers wanting to buy ethical diamonds.”
The ISO has not yet responded to the critique.
|
|
|
|
|
|
|
ECONWATCH
|
|
|
|
|
| |
Diamond Industry Stock Report
U.S. retailers saw strong gains in the past week, carried in part by positive second-quarter earnings results. Movado (+28%) and Signet (+14%) led the advancers. Far East shares continue to feel the effect of local market declines, with Chow Sang Sang and Chow Tai Fook both slipping more than 2% as local index falls 4%. View the detailed industry stock report.
| (Prices as of 09:00 GMT) |
Sept. 3 |
Aug. 27 |
Chng. |
|
| $1 = Euro |
0.8898 |
0.8851 |
0.005 |
|
| $1 = Rupee |
66.1905 |
65.875 |
0.3 |
|
| $1 = Israel Shekel |
3.9288 |
3.9382 |
-0.01 |
|
| $1 = Rand |
13.4936 |
13.0566 |
0.44 |
|
| $1 = Canadian Dollar |
1.3263 |
1.3217 |
0.00 |
|
| |
|
|
|
|
| Precious Metals |
|
|
|
|
| Gold |
$1,130.15 |
$1,128.63 |
$1.52 |
|
| Platinum |
$1,013.05 |
$996.20 |
$16.85 |
|
| Silver |
$14.71 |
$14.30 |
$0.41 |
|
| |
|
|
|
|
| Stock Indexes |
|
|
|
Chng. |
| BSE |
25,815.88 |
26,251.40 |
-435.52 |
-1.7% |
| Dow Jones |
16,351.38 |
16,285.51 |
65.87 |
0.4% |
| FTSE |
6,196.06 |
6,119.36 |
76.70 |
1.3% |
| Hang Seng |
20,934.94 |
21,838.54 |
-903.60 |
-4.1% |
| S&P 500 |
1,948.86 |
1,940.51 |
8.35 |
0.4% |
| Yahoo! Jewelry |
1,009.15 |
978.15 |
31.00 |
3.2% |
|
|
|
|
INDIA MARKET REPORT
|
|
|
|
|
| |
Polished Trading Activity
Slow demand and activity continues to hang over local polished market. Few overseas buyers seen this week. Weakening of rupee against the dollar affecting domestic activity. Liquidity remains tight.
Read the polished diamond trading report.
|
|
|
Advertisements
|
|
|
Advertisements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|