Midstream sentiment was positive in August as dealers returned from vacation. While the rough and polished markets slowed over the summer, traders remained confident of a strong second half. Wholesalers largely maintained prices, as they expected orders when buyers returned. However, the main cause of concern was the trade war between Washington and Beijing, which risked dampening retail sales in both the US
and China.
Prices were stable in the medium-sized and larger polished categories, though demand was weaker for smaller diamonds. The RapNet Diamond Index (RAPI™) for 1-carat diamonds was flat between August 1 and press time on August 25, while the index for 3-carat and 0.50-carat stones increased 0.2% and 0.1% respectively. RAPI for 0.30-carat diamonds fell 0.6%.
Rough demand strong
Larger and higher-value rough goods also moved well due to corresponding polished demand. Indian banks have reduced their lending to the trade, primarily damaging the buying power of smaller companies that normally purchase more expensive goods, Mountain Province noted. Firestone Diamonds also saw stronger demand for diamonds weighing 1 carat and higher at its most recent sale, while cheaper goods were weaker.
De Beers sold $530 million of rough at its July cycle, a relatively low figure due to the summer quiet. Demand is likely to be strong at the miner’s next sight in early September as Indian manufacturers look to increase production before they close for Diwali in November. Meanwhile, Alrosa’s July sales grew 16% year on year to $339.1 million, since the seasonal slowdown among its clients was less pronounced than a year ago.
While the jewelry sector remains confident for the upcoming holiday season, trade tensions with China are impacting sales expectations. President Donald Trump’s threat of a new 25% duty on certain Chinese goods — in addition to tariffs already in place — risks raising consumer prices in the US as importers seek supply from alternative sources, including domestically, according to the National Retail Federation (NRF). “The collateral damage to wide swathes of the US economy will be significant,” warned Jonathan Gold, NRF vice president for supply chain and customs policy.
Confidence down on consumer front
Consumer confidence fell in August due to increased concerns about prices of durable household items, as well as higher interest rates, according to the University of Michigan’s Surveys of Consumers.
Chinese demand is also under threat, with Chow Sang Sang warning of a negative impact on second-half results due to the diplomatic tensions. The weaker Chinese yuan currency could mean tourists from the mainland spend less money when visiting Hong Kong — an important source of revenue for retailers based in the municipality.
However, jewelry retailers that innovate will have a successful holiday season, predicted Marty Hurwitz, CEO of consultancy firm MVI Marketing.
“All those that have survived and are inventorying new product this year — not old product — will most likely do well. That includes upper-end luxury,” he told
Rapaport Magazine.Article from the Rapaport Magazine - September 2018. To subscribe click here.