Sentiment in the diamond trade was at two extremes in
February. On the up side, demand was strong across the rough and polished
sectors, continuing the positivity that dealers expressed in January. However,
Punjab National Bank’s fraud allegations against Indian jeweler Nirav Modi and
his uncle, Mehul Choksi, the managing director of Gitanjali Gems, shocked the
trade and raised fears that lenders would tighten credit to the industry.
Strong US holiday sales resulted in an upbeat atmosphere in
trading halls. Jewelry sales also grew during the important Chinese New Year
season, according to Xinhua, a state press agency. In addition, low polished
production in India late last year has resulted in shortages, supporting
prices, dealers said. Consumer demand is likely to grow this year amid
improving economic conditions, according to a year-end earnings report De Beers
released in late February.
This kind of optimism fueled a rise in polished prices, with
the RapNet Diamond Index (RAPI™) for 1-carat diamonds growing 0.8% between
February 1 and press time on February 26. RAPI for 0.30-carat diamonds jumped
4.3%, while prices of 0.50-carat diamonds rose 1.6%. RAPI for 3-carat stones
slipped 0.7%. Rapaport raised prices on the Rapaport Price List for select
categories in 0.30- to 0.50-carat and 1-carat goods on February 2.
Smooth sailing for rough
Rough demand was also strong. Prices at Mountain Province’s
February tender rose 7% from its last sale in December, according to the
company, which co-owns the Gahcho Kué mine in Canada with De Beers.
Petra Diamonds’ prices were 3% to 4% higher at its first
tender of the year compared with the average for July to December, the producer
said. Dealers were also anticipating strong demand at De Beers’ February sight,
which was still going on at press time.
Looking east
Expectations were high among traders ahead of the Hong Kong
International Diamond, Gem & Pearl Show and the Hong Kong International
Jewellery Show, which were due to take place in late February and early March.
The fairs are important trading events that help the industry gauge sentiment
in the Asian market.
However, the alleged scandal in India has made
dealers cautious about their ability to obtain bank credit — a major concern
for a trade that already has a difficult reputation in the financial industry.
The country’s Gem & Jewellery Export Promotion Council (GJEPC) played down
any major impact on the industry, noting the strict compliance processes that
diamond companies and their lenders go through. Even so, the midstream relies
heavily on dealer sentiment and consumers’ perception of diamonds. Damage there
could dent the otherwise positive buzz in the sector.
Article from the Rapaport Magazine - March 2018. To subscribe click here.