RAPAPORT... The first month of the year was filled with a pleasant holiday atmosphere. Most diamantaires in China were satisfied with their overall performance in 2006 and happy with the buoyant demand in January caused by the upcoming Spring Festival —the Chinese New Year, which falls on February 18 this year — and Valentine’s Day.
Some dealers in the Shanghai Diamond Exchange (SDE) report that they were optimistic about sales in Shenzhen, the most important jewelry manufacturing center in China, during December and January of this year, but they did complain about more frequent delays in payment. Demand from Beijing and Shanghai was keen, but the buyers were asking for greater discounts, especially for goods below 20 points. On the other hand, VVS, G to H, 40 and 50 points and 1-carat-up were in short supply, which caused a slight increase in price. Good SI goods were moving, but most demand was still concentrated in the better-quality range.
The customs office, located in the SDE —which is the only channel in China for diamond imports and exports except for diamonds under contract processing trade — released that total diamond imports and exports reached $566 million in 2006, a 38 percent increase over the previous year.
Brand Influence
Zhou Yi, vice general manager of Lao Miao Gold and Diamond Jewellery Co. Ltd., a major local jeweler, commented that the company’s sales performance has been quite satisfying in recent years, thanks to the effect of its brand, and he has good confidence in the local market in the years ahead. Zhou predicted that polished prices in the China market would go up this year. He said that sales of carat goods have increased considerably, but he felt more and more competition from the internet, especially for certificated goods. Young consumers are comfortable making their purchases on the internet, rather than visiting and comparing from shop to shop, and they can often get a better price on the net.
Zhao Dehua, general manager of Shanghai City Temple Shopping Center Co. Ltd., another famous local jeweler, said his company had a 30 percent increase in diamond jewelry sales in 2006 compared with the year before, and he thought this growth was typical for a jeweler with a well-known brand.
Diamond Versus Jade
While some dealers noted there could be an obstruction in sales for 2007 because it is not considered a good year to get married in China, Zhao was more optimistic: “There are more positive effects to offset the decrease of weddings if that will be the case in 2007.” He cited an “increase in nonwedding diamond jewelry or so-called ‘second piece’ diamonds that is noticeable in big cities in China. And one of the most important controllers of our business is the overall economic climate of China, which has been and will continue to be sound.”
City Temple Shopping Center is famous among consumers for its high-end jadeite jewelry and ornaments. When asked whether the increasing enthusiasm for jadeite in the market would draw consumers from diamonds, Zhao said: “In light of the high-speed development in the rate of the economy, there’s plenty of room for all kinds of jewelry in the market. It’s not necessary to take market share from each other. On the other hand, we do see a surge in demand for high-end jadeite, but mineral resources of jadeite are very much limited. We don’t have an adequate supply to expand our sales. We enjoy good profit from jadeite, but the sales volume is less than one-fifth of diamond jewelry in our shop. As a matter of fact, we buy more small diamonds to set with the jadeite.” Jadeite has been very hot in recent years, with a market size of 2 billion yuan — approximately $256 million — in 2006.
The optimistic mood in the stock market is a direct reflection of the economic climate in China. The Shanghai Composite Index, a major benchmark index of Chinese shares, broke 2,900 points for the first time in January 2007, climbing from below 1,200 points in the beginning of 2006.
In light of the tax adjustment on diamonds and the company’s good sales performance, the Diamond Trading Company (DTC) launched its branding campaign with ten leading jewelers in January, authorizing six outlets in Beijing and seven in Shanghai to sell diamonds bearing a “Forevermark.” Forevermark debuted in China with good coverage in different media. It is reported that the participating jewelers are confident that the Forevermark is being promoted at the right time and with the right mood in the market.
The Marketplace
• VS+, G-I, 1/10 to 1/3, have nice demand, but the price is almost unchanged.
• VVS, G-H, 40 to 50 points are in short supply, with about 2 percent increase in price.
• 1 carat and bigger stones are in short supply.
Article from the Rapaport Magazine - February 2007. To subscribe click here.