Industry
Trade Report
Polished prices softened in July largely on weak economic sentiment and reduced demand in key emerging markets.
By Avi Krawitz
The diamond industry grew cautious again in July with the U.S. wholesale market effectively closed during the summer vacation period and Far East and Indian demand waning on weakened economic sentiment. As a result, polished prices came under pressure throughout the month, particularly as Indian manufacturers contended with currency and liquidity difficulties. The RapNet Diamond Index (RAPI™) for 1-carat diamonds was down 1.5 percent during the period July 1, 2013, to July 22, 2013. RAPI for .30-carat diamonds fell 2.3 percent and RAPI for .50-carat goods declined by 1.7 percent during the period. RAPI for 3-carat diamonds fell .5 percent during the period.
YOU MUST HAVE JAVASCRIPT ENABLED TO VIEW THE SLIDESHOW
With manufacturing levels down and rough inventories relatively high, many are questioning whether the market can absorb the increase in rough supply expected in the second half of 2013. Mellier reported that De Beers has cleared its operational challenges at its two flagship mines — Jwaneng in Botswana, disrupted by a 2012 slope failure, and the Venetia mine in South Africa, hit by flooding earlier this year. Venetia production decreased 60 percent in 2013’s first half, with shortfalls alleviated through processing ore stockpiles. De Beers expects a return to full operations at Venetia in the second half of the year, which would contribute to a rise in overall De Beers production during the period. The company reported that production grew 6 percent year on year to 14.295 million carats in the first half after registering a 10 percent increase in the second quarter. Similarly, Rio Tinto reported a 20 percent production rise in the first half to 7.37 million carats, with second-quarter production up 47 percent.
High rough prices therefore continue to challenge the market even as rough sales remain steady. Published data from the major trading centers indicate a rise in activity during the first half of the year. In particular, India’s rough imports increased 11 percent year on year to $8.65 billion in spite of additional challenges facing manufacturers there. The rupee has lost about 9 percent value against the U.S. dollar since the beginning of 2013 and hit a record low of 61.21 in early July. That prompted the Reserve Bank of India (RBI) to implement measures to curb the currency’s devaluation, with little effect. The weak rupee has impacted consumer sentiment and high inflation has widened the gap between rich and poor. Local jewelers have been further impacted by government efforts to curb gold imports and consumption and their shares have plummeted. Some have noted a shift toward diamond jewelry will help improve their margins and boost sales. However, the weak rupee has also impacted diamonds traded in the domestic market, such as the cheaper, lower-quality rough, adding to manufacturing costs. That has resulted in many smaller manufacturing units considering whether to close or retrench workers.
Those rising costs have also influenced polished suppliers to try and hold their prices firm, with varying success. International buyers, sensing weakness in the Indian market, traveled to Mumbai to look for goods. But they found that prices were basically steady for popular VS-SI diamonds during July, while demand for better-quality VVS goods was weak. Prices for those goods were compromised. U.S. demand continues to uphold the market even during the traditionally quiet July vacation period. The steady U.S. market and good Far East demand for .30-carat to .50-carat, VS-SI, certified goods have helped buoy the trade in the first half of the year. Trade in the various centers remained about in line with those reported in the first half of 2012 with the exception of India, which, in fact, spiked. But caution about India and reduced expectations for Chinese economic growth have impacted sentiment in the diamond market and encouraged conservative buying trends. July was a quiet month all-around in the polished market and August is expected to follow suit during the vacation periods in Belgium and Israel. The focus will therefore remain on India as dealers hope the August Mumbai show will signal a better trend in the diamond market for the coming months.Article from the Rapaport Magazine - August 2013. To subscribe click here.
|
|