The first quarter is normally a period of restocking by retailers and dealers after the festive season. However, following disappointing holiday sales at the consumer level, January trading was slower than usual for the time of year.
Polished prices fell, with the RapNet Diamond Index (RAPI™) for 1-carat stones declining 0.5% between January 1 and press time on January 27. RAPI for 0.30-carat diamonds slipped 0.8%, prices of 0.50-carat stones went down 0.4%, and the index for 3-carat goods slid 1.6%. The drops in those categories were nonetheless gentler than during December.
Sentiment was weak in January following a difficult 2018 for the midstream. Lower Indian demand drove prices for smaller and lower-value rough and polished stones down in the second half of the year. The depreciation of the rupee and tighter bank lending to the country’s manufacturing sector had a negative impact on the market, and contributed to a sense of caution at the start of the year. Diamantaires were also concerned about the impact of rocky US-China trade relations, as well as the continued threat from lab-grown diamonds.
The market for uncertified melee slowed sharply in the latter part of the year due to an oversupply, as well as to the liquidity and currency situation in India, according to Alrosa. “Lower prices for small-size diamonds, coupled with flat personnel expenses, decreased the profitability of melee-diamond polishing,” the miner said.
Rough period
Rough demand echoed the situation in polished, Alrosa reported. De Beers also noted slower demand for lower-value rough goods, with its price index down 1% for the final six months of the year. Both companies recorded a drop in rough-diamond sales volume for the full year as a result, though the miners’ revenues increased as interest shifted toward the more expensive, better-performing categories.
The situation was worse for companies with a greater reliance on smaller-stone demand. Stornoway Diamond Corporation is one such miner, and it saw sales fall 22% to CAD 144.4 million ($108.8 million) in 2018 as prices of its goods slid 13% on a like-for-like basis in the second half of the year.
Weakness in retail
US consumer demand was uncertain at the start of 2019. Sentiment was weak due to a stock-market slump in late 2018, as well as concerns about the tariff war with China and the impact of a 35-day government shutdown that ended January 25. Meanwhile, holiday jewelry sales were mixed. Two of the largest US diamond retailers, Signet Jewelers and Tiffany & Co., reported disappointing seasons, partly because they were both in transition amid major strategic changes. Richemont-owned brands Cartier and Van Cleef & Arpels, however, had a solid performance globally, indicating strength in the high-end segment. Total US jewelry sales rose 3.7% from November 1 to December 24, compared with 6% growth last year, according to Mastercard SpendingPulse.
The retail market shifted focus to the Chinese New Year, for which the main shopping season is in January. Sales expectations were low, as the tariff dispute had impacted luxury spending in greater China. Traders will start to get more nervous if the global market doesn’t pick up soon.
Article from the Rapaport Magazine - February 2019. To subscribe click here.