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Year in Review: Diamond Trading During Covid-19

Roundup of Rapaport Weekly Market Comments from 2020

Dec 29, 2020 5:10 AM   By Rapaport News
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The diamond industry underwent rapid changes in 2020 as the coronavirus swept through the world and devastated economies. The much-read Rapaport Weekly Market Comment kept up with the news, narrating the state of the trade while the situation developed at high speed.

In the first quarter, this included the virus’s shift from an epidemic in China to a major pandemic that shut down rough and polished trading, forced retail stores to close, and hammered diamond prices. The report also tracked how the industry came to deal with the new reality in later months, and how shortages and the release of pent-up demand fueled a modest recovery in the second half.

With sentiment mixed at the close of a difficult year, we look back at the key stories and trends the Rapaport Weekly Market Comment identified in each month.

January

• Mixed results from holiday season, with record e-commerce sales driving growth.
• Dealers focused on filling US orders as jewelers begin post-holiday inventory replacement.
• Chinese coronavirus outbreak raising concerns about retail demand as businesses extend Lunar New Year shutdown.
• Travel restrictions likely to affect global trading, leading to possible polished oversupply following strong rough demand.
• Hong Kong luxury weak as protesters start year with massive demonstration.
• Strong interest in 0.30 ct., D-F, IF-VS1 due to Chinese New Year demand and shortages of RapSpec A3+ goods. High-end 3 ct. and larger weak.
• Increasing rough demand raising polished-oversupply concerns as large quantities expected to enter market in coming weeks.
• Concern that US economic growth will slow in 2020 election year.

February

• Diamond market weak as coronavirus shuts down China and weighs on global economy.
• Indian market facing severe liquidity crunch as sales to China stop.
• Luxury retailers reviewing Hong Kong presence after 2019 protests and ongoing epidemic lead to drop in sales.
• De Beers gives sightholders added flexibility on Chinese goods.
• Reduced demand leading to polished inventory buildup, since manufacturers bought large volume of rough in Dec./Jan.
• Miners with inflated inventory cautious about 2020 production.
• Hong Kong shows postponed to May.

March

• Diamond industry facing severe liquidity crisis as coronavirus spreads to US.
• Jewelers holding large inventory and have scaled back polished purchases.
• Unprecedented disruption to diamond industry as US retail, India manufacturing and South Africa mining shut down.
• Signet Jewelers, Tiffany & Co., Macy’s, Saks, J.C. Penney close stores, signaling dramatic shift to digital stay-at-home economy.
• GIA closes US, Belgium and India labs.
• Declining stock and commodity markets rattle consumer confidence.
• Suppliers uncertain about prices as buyers push for deeper discounts.
• JCK Las Vegas shows postponed.
• De Beers enables 100% deferrals at March 30 sight.
• Rough prices fall estimated 10% to 25% at March auctions.

April

• Trading limited to online deals, with opportunistic buyers pushing for even higher discounts.
• Some centers start to ease lockdown restrictions.
• China business reopening amid new coronavirus reality.
• Dealers and manufacturers focusing on how to reduce inventory, with more than enough rough and polished in the pipeline to satisfy demand.
• Outlook uncertain as US economy shrinks 4.8% in 1Q.
• Miners cut 2020 production plans and India prepares voluntary 30-day pause in rough imports.
• Alrosa allows 100% deferrals at monthly sale.
• Marketers to focus on bridal as pandemic highlights important relationships.
• De Beers expects tighter consumer budgets will signal shift to fewer, better-quality diamond purchases.
• Exhibitors clash with Baselworld over refund policy as watch majors Rolex, Patek Philippe, Chanel, Chopard and Tudor pull out.
• JCK Las Vegas and Luxury 2020 shows canceled.

May

• US retailers resuming operations in most states, with emphasis on in-store hygiene, virtual consultations and curbside service.
• Major jewelers returning memo inventory and trying to revise supply agreements to include longer payment terms.
• New York trade remains shut.
• Gradual reopening of economy in China signals some pent-up demand in bridal and among female self-purchasers.
• Polished and rough trading limited to online formats.
• De Beers urges manufacturers to keep supply chains open, even at drastically reduced levels, as India postpones rough-import moratorium to June 1.
• Dealer market facing liquidity crunch.
• Rough trading at a near standstill, with enough goods available to satisfy 2Q and 3Q demand.
• Baselworld cancels show scheduled for Jan. 28, 2021.

June

• Market uncertainty continues as Covid-19 cases rise again.
• Polished trading limited, but increase in online searches indicates efforts to fill specific orders.
• Major jewelers investing in e-commerce to stimulate multichannel sales and ease inventory requirements.
• Riots and looting keep US jewelry stores closed following tragic death of George Floyd.
• Manufacturers operating at reduced capacity and facing liquidity strain at current demand levels.
• Growing interest in investment diamonds, with higher prices for D-IF, 0.50 ct. and 1 ct. (3X, none) goods.
• Rough easier to source at tenders than contract sales as De Beers and Alrosa maintain higher prices.
• Dealers and jewelers anticipating rise in bridal demand.

July

• Rise in infections disrupting efforts to reopen businesses in major diamond trading and cutting centers.
• Supply shortages supporting polished prices as cutters refrain from rough purchases.
• Manufacturing profit margins better than pre-pandemic, resulting from select rough buying that aligns with polished demand.
• Steady demand for 0.50 to 1 ct., D, IF and bridal goods.
• Miners building rough inventory; midstream inventory reduced as manufacturers limit rough buying.
• De Beers and Alrosa prepared to sell fewer diamonds at higher prices through the downturn.
• Trade sees potential for good holiday season since consumers are not spending on travel.
• Major retailers investing in technology to drive multichannel sales.
• Savvy independents nurturing ties with local communities to maintain market share.

August

• Sentiment improving as US and Chinese jewelers gain confidence ahead of holiday season.
• Sight goods selling at premiums on the secondary market after De Beers reduced prices 6% to 8% for 1 ct. rough and larger.
• Rough sales rise due to polished shortages and lower prices.
• Cutters consider increasing production.
• Good demand for 0.50 ct., G-I, SI2 diamonds.
• Polished demand selective, with wide availability of difficult-to-sell inventory.
• De Beers considering layoffs and investing in tech to enable more efficient and customized supply.
• Alrosa in talks to sell $500M to $1B of excess supply to Gokhran.

September

• Polished prices firm amid shortages and improving holiday orders.
• Jewelers preparing 4Q marketing with emphasis on e-commerce strategies to drive growth.
• Steady US and Far East demand for 0.30 to 2 ct. goods in all colors and clarities.
• Retailers pushing dealers for memo; more manufacturers insisting on cash deals.
• De Beers reduces prices by 5% to 10% for rough below 1 ct.
• Cutters’ profit margins up following De Beers and Alrosa price reductions.
• 5 ct., D, IF strong due to scarcity, fewer suppliers, and demand from wealthy consumers.
• Dealers struggling to fill orders due to low manufacturing and high shipping costs.

October

• Retailers beginning early promotions and planning for longer 4Q selling period to avoid overcrowding among last-minute shoppers.
• E-commerce supporting retail market; jewelers with strong digital presence doing well.
• Bridal category supporting the trade.
• Dealer trading slow as manufacturers focus on direct supply to jewelers.
• Selective demand has left dealers struggling to fill orders due to scarcity of stones in specific categories.
• Manufacturing down by estimated 50% in 2020.
• Cutters trying to raise production after robust rough buying at lower prices in Aug.-Sep.
• Global brands focusing on China and e-commerce as mainland luxury shoppers limit travel, impacting seasonal sales at Hong Kong, New York and London flagships.

November

• Sentiment improving as US consumers gain confidence following Biden election win.
• Covid-19 continues to spread, with concerns about crowded shopping areas.
• Jewelers investing in e-commerce, pushing Black Friday promotions on social media.
• China strong, with robust Singles’ Day sales.
• India sees release of pent-up demand over Diwali.
• Steady demand for 1 to 2 ct., G-H, VS-SI goods in bridal category.
• Positive momentum continues in rough market.
• Rio Tinto’s iconic Argyle mine ends production, having recovered 825 million carats in 37-year life.

December

• Positive sentiment as Covid-19 vaccine receives FDA approval.
• Holiday season successful for e-commerce businesses.
• Brick-and-mortar quiet due to spread of Covid-19.
• Chinese jewelers expecting release of pent-up demand during Feb. 12 Lunar New Year.
• Manufacturers raising polished production in anticipation of post-holiday inventory replacement.
• Rough market robust after prices increased 1% to 2% in select categories at De Beers sight.
• Next year’s March Hong Kong shows and AGS Conclave postponed due to pandemic.

Image: Polished diamond with tweezers. (Shutterstock)
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