The diamond trade spread itself among Las Vegas, Hong Kong, Moscow and Gaborone in search of a much-needed boost in June. Ultimately, however, the various shows and rough sales that took place during the month did little to lift sentiment as sluggish demand and tight manufacturing profit margins continued to characterize the market at the midpoint of the year.
Loose-diamond trading was slow at the JCK Las Vegas show, reflecting challenges in the midstream rather than a poor state of US demand, several exhibitors observed. If anything, the US market is stable, and activity at JCK was more robust for finished-jewelry vendors. Retailers are starting to prepare their inventories for the traditionally busier end-of-year period.
That hasn’t been enough to raise polished trading, which was cautious throughout the month, as it has been for most of 2019. Buyers were hesitant to make large purchases in a downward-trending market, as they don’t see a bottom yet for prices, explained one Hong Kong-based supplier. Retailers are taking more goods on memo, others noted.
US versus China
Polished prices continued to soften, with the RapNet Diamond Index (RAPI™) for 1-carat diamonds declining 0.7% between June 1 and press time on June 24 (see graph). The index was down 2.5% for the year to date. There was steady demand at the JCK show for 0.60- to 1.99-carat, I to J, VS to SI diamonds — typical “American” goods — while other categories were relatively weak. RAPI for 0.30-carat polished fell 1.3% during the period and was down 10.6% since the beginning of the year amid a slowdown in China and Hong Kong, where the category is a
strong item.
Geopolitical factors have impacted activity in greater China. with the trade war affecting sentiment since it first surfaced almost a year ago. The mass protests in Hong Kong against Chief Executive Carrie Lam were ill-timed for the Jewellery & Gem Fair that took place in late June, and many buyers from mainland China chose not to attend, exhibitors told Rapaport Magazine.
Inflated inventory
Instead, the June Hong Kong show was characterized by Indian dealers looking for bargains. With declining polished prices and relatively expensive rough squeezing manufacturers, companies in the midstream are sensing it’s better to buy polished than invest in manufacturing new goods.
De Beers’ rough sales fell 33% year on year to $390 million in June, the company’s lowest monthly sale since October 2017.
“While overall retail sentiment for diamond jewelry in the US remains solid, a more challenging environment in China and higher-than-normal polished-diamond inventories in the midstream resulted in a cautious approach from rough-diamond buyers,” said De Beers CEO Bruce Cleaver following the June sight.
The miner reduced prices by 4% to 8% on smaller and lower-quality rough, which are the categories in which polished inventories have risen most, sightholders reported. Manufacturers, meanwhile, have reduced polished production an estimated 20% to 30% this year and have also shifted to cutting cheaper goods as a means of keeping workers busy and minimizing costs, according to one Antwerp-based cutter.
“The manufacturing sector is under pressure,” stressed a Mumbai-based sightholder. “People don’t want to do business in the rough market.”
Article from the Rapaport Magazine - July 2019. To subscribe click here.