Rapaport Magazine
Markets & Pricing

Rough market soars

Polished shipments and prices are lagging behind, though they are also seeing a strong recovery.

By Joshua Freedman
The diamond industry strengthened in July as robust sales continued in key retail markets. Both rough and polished goods were in short supply, as mines did not produce enough volume to match the buoyant demand from consumers and the trade. Lengthy turnaround times at the Gemological Institute of America (GIA) also limited the availability of certified stones.

“Jewelry demand remains strong in all the key markets,” Alrosa said in its half-year production report. “At the same time, miners’ rough-diamond inventories hit rock-bottom levels.… [The] midstream is also witnessing a decline in the inventories of rough and polished diamonds.”

Polished prices grew in most categories. The RapNet Diamond Index (RAPI™) for 1-carat goods jumped 3% between July 1 and 22, reflecting steady US engagement-ring demand. RAPI for 0.30-carat stones increased 0.8%, while the index for 0.50-carat diamonds advanced 1.4%. Prices for 3-carat diamonds bucked the trend, slipping 0.1%.

Bubble approaching?

While the midstream largely welcomed the price growth, there were concerns that rough was becoming too expensive relative to polished. This raised fears of a price bubble in the rough sector.

During the first half of 2021, De Beers and Alrosa respectively increased prices by 14% and 16%, according to July reports from the two companies. Tender prices were even stronger, with some organizers seeing increases of up to 40% for the same period. This contrasted with a rise of just under 8% in the RAPI for 1-carat polished during those six months.

“The rough market is taking jumps that are not justifiable,” said an executive at one manufacturer. “Goods are being sold just because they are there.”

Global rough shipments rebounded from 2020’s unprecedented second-quarter slump. India’s imports soared almost sixfold to $1.7 billion in June versus $303.1 million a year earlier, according to data from the country’s Gem & Jewellery Export Promotion Council (GJEPC). Supply to Belgium surged 187% year on year to $1.01 billion, the Antwerp World Diamond Centre (AWDC) reported. Both increases reflected strong sales at the month’s De Beers and Alrosa trading sessions.

However, while polished trading strengthened, its recovery lagged behind that of rough, noted Karen Rentmeesters, the AWDC’s senior manager for industry relations. Belgium’s June polished exports increased 58% to $738.9 million.

“Since the outbreak of the pandemic, there have been no trade shows whatsoever, which traditionally create a lot of movement of polished goods in the industry,” she explained in a statement. “In addition, the devastating third wave in India in the first half of this year had a major impact on the somewhat slower trend of polished business picking up throughout the global industry.”

With jewelers keen to return to physical trade shows, the focus was on JCK Las Vegas, which is scheduled to take place in the Nevada city from August 27 to 30. However, Covid-19 outbreaks, especially in Europe, raised questions about how many overseas participants would be able to attend the American show.

Resurgent retail

Ahead of the fair, the US saw solid jewelry demand. Sales in the category rose 108% year on year in June and were 59% higher than in June 2019, according to Mastercard SpendingPulse. The market showed little sign of slowing, as consumers still had limited opportunities to spend on other luxuries such as vacations and entertainment.

Meanwhile, China’s domestic market continued to recover as shoppers remained unable to travel abroad. The country’s polished-diamond imports — after returns of unsold goods — came to $1.58 billion in the first half of 2021, more than the total for all of 2020 and 49% higher than in the same period of 2019, according to the Shanghai Diamond Exchange.

The imbalance between supply and demand has put the trade in an unusually strong position. However, as is often the case, much will depend on the success of the upcoming holiday season.

Article from the Rapaport Magazine - August 2021. To subscribe click here.

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