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Rapaport Weekly Market Report 07/08/2010

Jul 9, 2010 1:00 PM   By Avi Krawitz
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RAPAPORT... Between the Lines

Rough Market: Diamdel’s 1H Auctions Strong, But Rough Market May Turn Cautious

Diamdel, the De Beers subsidiary that markets rough diamonds to the secondary market, reported strong demand for goods at its online auctions in the second quarter of 2010. The company sold 95 percent of the 157 lots placed on auction at their first presentation during the period, with just 5 percent not meeting reserve. The stones sold spanned goods below 0.75-carat, 0.75- to 2-carat categories, and 2.00- to 15-carat sizes.

The company added that through the first six months of the year, it sold 97 percent of the 295 lots made available at the online auctions, with the demand for rough in the 2.00-carat-plus sizes being the “most intense” among the 164 different businesses that participated in the auctions. Neil Ventura, Diamdel’s managing director, noted that small- to medium-scale companies won more than two-thirds of the lots, which indicated a different participant profile than in 2008.

Diamdel’s total sales may be disclosed when De Beers reports its first-half results on July 27. Rapaport News estimates indicate that the Diamond Trading Company’s (DTC) first-half sales were up 76 percent year on year to $2.46 billion, as sightholder demand was also strong during this period.

The true test, however, will come at the DTC’s next sight, which begins on July 18, and over the remainder of the third quarter, when manufacturers start preparing for the Christmas season. With indications this week that the rough market has cooled slightly since the recent BHP Billiton tender, where prices reportedly dropped a bit, the third quarter may yet reflect a cautious environment.

Manufacturing & Wholesale: Israel Continues to Recover

Israel’s diamond industry reported that it continues to recover after polished exports nearly doubled to $3 billion in the first half of the year, while rough imports jumped 113 percent year on year to $1.8 billion. The trend is encouraging, but the data again should be put into perspective by being compared against 2008 totals, rather than to the lows of the first half of 2009. Compared to the first half of 2008, polished exports fell 21 percent in the first half of 2010, while rough imports dropped 34 percent in 2010.

While it may be premature to proclaim a recovery in the market, the quarterly trend, as reflected in the graph below, is positive and the rate of growth appears to be healthy, as one would not want the market to have reached 2008 levels at this point. However, the data does indicate that there is still some way to go. As long as Israel’s polished supply curve and its rough demand curve remain stable and tending upward, the market’s recovery will continue.



Retail: Gitanjali Expands in Asia Pacific, Cautious About U.S.


Gitanjali Gems is planning a major retail expansion in the Asia-Pacific region, announcing that it will open 500 stores by March 2011, with most of these to be located in India. Company chairman Mehul Choksi told Bloomberg this week that Gitanjali intends to increase its local market share there from 3 percent to 5 percent. He added that the company expects to double the number of stores based in China to 100 over the next three years and to expand its Middle East presence by opening its first company-owned outlet there.

Equally telling, Choksi said he would continue to watch the U.S. market carefully, but the company is focusing on the growth markets of India, China and the Middle East. Gitanjali bought Samuels Jewelers Inc. in 2006 and Rogers Ltd. in 2007 to launch in the U.S.

“The retail environment in the U.S. has picked up this year considerably, but we still need to watch,” Choksi said. “In Japan, the recession has stayed for 20 years, so we don’t know what will happen in the U.S.”

Global Markets

United States: Trading in New York has quieted with the start of the traditional jeweler’s holiday in July. Wholesalers still report that bread-and-butter rounds with ideal makes from 1.00 to 2.00 carats, I+, SI2+ are selling well. Cushion shapes are also proving popular, while sales of other fancy shapes appear to be slow. Retailers reported slow consumer traffic over the July 4 weekend and expect the rest of the month to remain quiet due to summer vacations. Bridal goods remain the most popular sales line.

Belgium: There is activity in Antwerp, even if business is not booming. Some are anticipating a surge in selling ahead of the August summer vacation period, but remain skeptical due to price gaps between buyers and sellers. The slight decrease in BHP Billiton goods reported in June has triggered some caution in the market. There is good demand for pique goods in all sizes, while demand for 1.00- to 2.00-ct, D-H, VS is stable. There is good activity in 5.00-ct., D stones, while other, larger categories remains slow.

Israel: Trading has improved slightly, but remains quiet, as is expected for the time of year in the run-up to the August summer break. Some suspect that the U.S. July vacation period is also contributing to the quieter trading environment in Ramat Gan. There is good demand for 0.30- to 0.70-ct. sizes, while there has been some improvement in demand for 3.00-carat-plus goods.

India: Trading was relatively slow, despite the presence of foreign buyers in the market. There has been some indication that sellers have softened on their prices, given the weaker environment. Similarly, activity in the rough market was cautious, with some demand seen for mixed lots. In polished, there was good demand for melee, J+, SI-pique goods and overall good demand for 1.00-ct. goods. There was improving demand for 2.00-ct., J+, VS+ goods, while demand for VVS clarities slackened.

China: The market is stable, although both retailers and wholesalers recognize they have entered a slower period of the year. Extreme weather conditions have also discouraged consumers from going out to buy, although there has been continued strong interest in seeing the Belgium Pavilion at the World Expo in Shanghai, which features a diamond exhibition. There is good demand for 0.30- to 1.10-ct., D-J, VVS-SI, Gemological Institute of America (GIA)-certified and preferably EX-cut stones, while demand is stable for parcel goods in the 0.20- to 0.30-ct., H-J, VS-SI categories.

Hong Kong: The market is stable, with traders in a positive mood following the June Hong Kong Jewellery & Gem Fair 2010 held last week. Buyers are encouraged by signs of weakening prices in polished, but price gaps still exist between buyers and sellers and there remain strong variations between these prices and those seen in the manufacturing centers. There is good demand for high-color SI goods and medium- to high-color, VS-SI stones, while demand for high-end goods in general remains stable.

Quote of the Week

In light of next week’s continued Kimberley Process discussion regarding Zimbabwe’s participation in the scheme, at the World Diamond Congress meeting in St. Petersburg, we recall physicist, philosopher and author Albert Einstein’s words:

“Concern for man and his fate must always form the chief interest of all technical endeavors. Never forget this in the midst of your diagrams and equations.”

Note: This article is an excerpt from a market report that is sent to RapNet members on a weekly basis. To subscribe, go to www.rapnet.com or contact your local Rapaport office. The writer can be contacted at avi@diamonds.net.

Disclaimer

©Copyright 2010 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400. This Rapaport Market Report is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags: Avi Krawitz, Auctions, Avi Krawitz, Belgium, BHP Billiton, China, Consumers, De Beers, Diamdel, DTC, GIA, Gitanjali, Hong Kong, India, Israel, Japan, Kimberley Process, Manufacturing, United States, Zimbabwe
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