Rapaport Magazine
Markets & Pricing

Miners still reporting shortages

Polished prices have been mixed, while retailers predict robust holiday results.

By Joshua Freedman
The diamond market showed mixed signals in August. While consumer demand remained strong, some major trading centers saw reduced activity during the summer vacation. In addition, polished inventories began to rise, raising questions about the longevity of the industry’s recent recovery.

The sector was focused on the upcoming JCK Las Vegas show, which was scheduled to take place from August 27 to 30. However, traders expected the loose-diamond section to be quieter than usual, as many overseas dealers were unable to travel. The Belgian diamond industry chose not to host a pavilion at the show, citing the uncertainty, while India’s section was due to house local representatives only.

While the desire to return to trade shows is high, the industry has learned to cope without them in the past year and a half.

Meanwhile, global shipments have rebounded from their 2020 slumps, often exceeding pre-pandemic levels. India’s polished exports soared 146% year on year to $2.26 billion in July, the highest for any month since February 2019.

Polished prices were varied, with larger sizes performing better than smaller goods. The RapNet Diamond Index (RAPI™) for 1-carat diamonds grew 0.2% between August 1 and 19, a gentler rise than in previous months, while RAPI for 3-carat stones climbed 0.6%. However, the 0.30-carat index fell 0.6%, and prices in the 0.50-carat category slipped 0.3%. It’s unclear exactly why the market has become segmented. For the categories that have fallen, a possible influence may have been the gradual growth in stockpiles within the midstream. The number of diamonds on RapNet — across all categories — jumped 20% between July 1 and August 19, reaching just under 1.6 million stones.

Rough strength continues

Rough prices remained robust because there were still shortages. The large miners have had limited production and depleted much of their inventories during the buoyant first quarter, making it difficult to meet the continued strong demand.

However, prices at the dealer level, which had been sky-high, dropped by around 3% to 5% between late July and mid-August, according to estimates by Alrosa. The miner believes the decline was due to a release of goods by Gokhran, Russia’s state gem depository, which sold $139.2 million in rough — 70% of it to Alrosa — at an auction on July 23.

“On the secondary markets, there is a speculative situation [regarding] prices, because some of the players are ready to pay any price for goods, taking into account the reduced allocation of rough goods directly from miners,” Alrosa deputy CEO Evgeny Agureev told Rapaport Magazine. “From this point of view, I think the Gokhran auction [that] happened in July was really at the right time to bring more goods to the industry and also to [demonstrate] that it’s not necessary to pay these speculative prices for goods.”

Those elevated rough prices had weighed on manufacturing profits. Cutting firms in Surat raised polished production ahead of the holiday season, but were still operating at around 80% of capacity.

“The strong recovery in consumer demand is expected to continue as the global economy recovers from the impact of Covid-19,” De Beers said July 29 in its half-year report. “In addition, midstream capacity is expected to increase during the second half of the year, subject to the Covid-19 situation in India.”

From the JCK fair onward, the industry will be fixated on the important US festive period. Retail sales have been strong all year, as consumers have had limited opportunities to engage in travel and other experiences. With society and the economy gradually returning to normal, the coming months present opportunities for retailers.

“We expect that it’s going to be a very strong holiday season,” said Jeff Gennette, chairman and CEO of Macy’s, in an August 19 call with investors. Customers, he noted, were “coming back together maybe for the first time in a couple of years.”

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

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