The diamond market improved in November as the US market showed steady demand ahead of the holidays. Certain better-quality goods have become scarce, supporting prices for dealers.
A slowdown in manufacturing ahead of the Diwali festival helped ease the recent oversupply crisis, with factories in Surat closing for around three weeks in late October and November. The number of unique diamonds on RapNet declined 8% between July 1 and November 24 to just under 1.4 million stones.
“There is a decline in stock levels, especially in the 0.30- to 0.50-carat [polished] categories,” noted Dudu Harari of rough brokerage firm Bluedax in a November 13 market report. As such, “clients must be less selective, because there are fewer options.”
Prices of smaller goods improved, with the RapNet Diamond Index (RAPI™) for 0.30-carat stones climbing 4.4% between November 1 and 24, and RAPI for 0.50-carat diamonds rising 1%. The upward trend prompted the Rapaport Group to increase prices for select 0.30- to 0.49-carat goods on the Rapaport Price List on November 22. The index for 1- and 3-carat stones fell 0.3% for the same period.
Balancing supply
The midstream earned some breathing room after De Beers reduced rough prices at its November sight, fueling expectations of better profit margins for manufacturers and dealers. The company waited for an upturn in the polished market before offering the discounts, aiming to avoid a negative impact on polished prices further down the line, a sightholder explained.
The market is heading toward a better balance of inventories, as major producers have reduced supply, Alrosa observed. The Russian miner has seen a stabilization of rough demand and prices since early August, with sales rising 9% year on year to $264.4 million in October.
The China factor
Retail sentiment is supporting the moderately positive outlook: Global consumer demand for diamond jewelry is “broadly stable,” according to De Beers CEO Bruce Cleaver. Yet sales showed strong variation between markets.
The US retail sector looked solid ahead of the holidays, with large quantities of goods out on memo at jewelers, and stores preparing their Thanksgiving and Black Friday promotions. US consumer confidence rose 1.4% in November, according to the University of Michigan’s Surveys of Consumers.
However, protests in Hong Kong and macroeconomic uncertainty across greater China have weighed on sales in key Asian markets. Revenue from jewelry, watches, clocks and other valuable gifts in Hong Kong dropped 41% year on year to HKD 3.63 billion ($463.6 million) for September, reported the municipality’s Census and Statistics Department. The Hong Kong government expects the weakness to continue.
At the same time, the tariff war between Washington and Beijing has cast doubt on future consumer demand.
“While the US and China have resumed trade talks, the economic outlook remains gloomy and shrouded in uncertainties as a trade consensus continues to appear beyond reach,” Hong Kong-
based jeweler Tse Sui Luen
said November 19.
That has left the diamond market quite reliant on a successful US holiday season to help keep demand and inventory levels stable.
Article from the Rapaport Magazine - December 2019. To subscribe click here.