Rapaport Magazine

Economic Bulletin

July 2007

By Rapaport
RAPAPORT... Consumer Price Index Jumps

Energy and food costs are soaring in the United States—and taking the Consumer Price Index (CPI) along for the ride. The CPI rose 0.7 percent in May, bringing the annual increase to 5.5 percent, twice the rise that registered in all of 2006.

Leading the advance in the month of May were gasoline prices, which rose 10.5 percent—the largest increase since September 2005, after hurricanes hit the Gulf Coast. The Federal Reserve, however, is only concerned with the “core” increase in prices, which excludes energy and food, so it reported an increase of just 0.1 percent, with industrial production flat.

Meanwhile, the U.S. Department of Commerce reported that the nation’s trade deficit for January through April came in at $239.2 billion, a drop of 6 percent from the same period in 2006.

U.S. Imports, Exports Rise

During the month of April, polished diamond imports to the United States rose 8 percent to $1.212 billion and polished exports rose 32 percent to $813 million. The price per carat rose 18 percent to $1,147.

Rough imports were flat at $52 million, and rough exports rose 120 percent to $33 million. So far in 2007, polished imports rose 7 percent to $5.593 billion and polished exports rose 14.7 percent to $3.33 billion. Rough imports for the period from January through April rose 32 percent to $278 million while rough exports rose 92 percent to $192 million.

India’s Polished Exports Up

India’s cut and polished diamond exports grew 6.7 percent, to $770.49 million, while cut and polished imports rose 45 percent, to $209.17 million, in April, the first month of India’s fiscal year, the Gem & Jewellery Export Promotion Council (GJEPC) reported. Rough diamond exports rose 73 percent to $47.3 million, while imports rose 5 percent to $805.52 million.

In May, India’s cut and polished diamond exports grew 9 percent to $970.22 million, GJEPC reported. Cut and polished imports grew 25 percent to $199.11 million. Rough diamond exports dropped 34 percent to $34.56 million, while imports rose 6 percent to $744.62 million.

India’s net diamond account (net polished exports less net rough imports) was $61.05 million in May 2007, after being in the red $83.58 million a year earlier.

Belgium’s Business on the Rise

Belgian polished exports in May rose 6.6 percent to $965.6 million, while polished imports rose 8 percent to $858.9 million. Rough diamond imports rose 2.7 percent to $936.7 million, and rough exports rose 2.3 percent to $952.9 million.

Calendar year to date, Belgium’s polished exports have risen 7.1 percent to $4.31 billion and polished imports have risen 4.9 percent to $4.01 billion. Rough imports have risen 9 percent to $4.21 billion and rough exports have risen 14 percent to $4.58 billion.

Israel’s Diamond Trade Grows

Israel’s polished diamond exports grew 1.9 percent to $906 million in May 2007 compared to May 2006, its Ministry of Industry, Trade and Labour reported. Polished diamond exports in June 2007 grew 9 percent to $351 million when compared to June 2006. For the first five months of 2007, polished exports rose 5.4 percent to $3.23 billion, while imports grew 4.3 percent to $1.61 billion.

Polished diamond imports fell 1.8 percent to $320 million in May. In June, polished imports rose 9 percent to $351 million, bringing Israel’s net polished exports to negative $9 million, 13 percent lower than in June 2006.

Rough imports in May were flat at $447 million, growing 24 percent to $448 million for June. In May, rough exports grew 20.7 percent to $321 million before jumping 75 percent in June to $341 million.

Japanese Import Slide Continues

Japan’s imports of polished diamonds fell for the ninth consecutive month in April, down 21 percent to $69.36 million. The total carat weight of imports dropped 15 percent to 177,752 carats. Between January and April, Japan’s polished diamond imports fell 18 percent to $306.5 million, compared with the first four months of 2006.

Supply from all of Japan’s polished diamond sources dropped during April, except from China, which increased more than three-fold to $1.95 million. India remained Japan’s top supplier despite a 19 percent drop in supply to $31.64 million. Imports from Belgium fell 15 percent to $20.82 million, while those from Israel, Japan’s third largest supplier, declined 15 percent to $7.4 million.

Imports of ruby, sapphire and emerald stones grew 10.3 percent to $4.07 million with 89 percent of the total coming from China. For the category of “other colored stones,” imports fell 16.7 percent to $5.4 million. The majority of the imports came from Hong Kong, which grew 57 percent to $2.89 million, and Brazil, which declined 86 percent to 9 million. Japan’s pearl imports dropped 20.3 percent to $20.88 million, while platinum jewelry fell 9 percent to $36.16 million and gold jewelry by 31.4 percent to $59.2 million. Imports of silver jewelry declined 14.3 percent.

Russia’s Diamond Exports Drop 6 Percent

Russia’s diamond exports for 2006 fell 6.25 percent to just short of 35 million carats. Of the top gem-quality importers of Russia’s rough, Belgium held the number one spot with an increase of 8 percent to 11.2 million carats; the United Kingdom ranked second with 7.7 million carats, a drop of 13 percent from 2005; Israel ranked third with 1.3 million carats, a drop of 43 percent; the United Arab Emirates ranked fourth with 1.15 million carats, up 19 percent; Hong Kong ranked fifth with 482,000 carats, an increase of 760 percent; and India ranked sixth, improving its rough imports 47 percent to 264,000 carats.

For bort diamonds, Israel ranked number one with 5.4 million carats, a drop of 14 percent; the United Arab Emirates ranked number two with 3 million carats, an increase of 50 percent; Hong Kong ranked number three with 2.4 million carats, a drop of 8 percent; and Belgium ranked number four with 1.3 million carats, a drop of 57 percent.

The United States increased its bort rough 148 percent to 557,000 carats, and quality imports rose to 2,000 from zero. However, according to the United States’ import and export figures from Russia, rough imports in total rose 863 percent to 443,033 carats. In value terms, rough imports to the United States from Russia rose 110 percent to $27.3 million while polished imports from Russia to the United States rose 8 percent to $137 million.

Israel’s Economic Growth Slows

Israel’s economy grew 6.3 percent in the first quarter of 2007, slowing from the 7.3 percent rise in the previous quarter, the country’s Central Bureau of Statistics (CBS) reported. The CBS attributed the growth to an 11.8 percent rise in public spending and an increase in exports of goods and services. Exports of goods and services grew an annualized 11.1 percent, compared with 9.3 percent in the fourth quarter of 2006. Exports of diamonds grew 14.6 percent in the first quarter of 2007, from the previous quarter, and by an annualized 72.4 percent, the report stated.

Aber Diamond Sales Up

The Aber Diamond Corporation announced that sales rose 18.4 percent to $141 million in the first fiscal quarter ended April 30. Despite the increase, net earnings slumped 87.5 percent to $3 million, the Toronto-based mining company reported last month. Earnings per share dropped 85 percent to 6 cents. Earnings were hurt by a foreign exchange adjustment of $13.6 million, not deductible for Canadian tax purposes, that was applied to the provision for future income taxes payable.

Through its 40 percent stake in Canada’s Diavik Diamond Mine, Aber supplies rough diamonds to the global market. The company is also a retailer of diamond jewelry through its subsidiary Harry Winston, which had solid sales growth for the quarter.

From the Diavik mine, Aber reported its strongest-ever first quarter production figures, as it mined 1.034 million carats of diamonds, up 44.6 percent from the same period in 2006. 

DateGold London PMPlatinum PMSilver

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