Rapaport Magazine
Markets & Pricing

Jewelry exceeds expectations

Retailers and wholesalers enjoy solid trading conditions as miners struggle to keep up with supply.

By Joshua Freedman
The diamond sector ended 2021 on an upbeat note, with retail appetite reaching levels that jewelers hadn’t seen in years. Wholesalers saw robust sales as demand outpaced supply in most categories. The biggest challenge was replenishing inventory, because the pipeline had tightened following drops in production of rough and polished.

The holidays were strong. US jewelry sales jumped 32% year on year for the period from November 1 to December 24, according to retail-data provider Mastercard SpendingPulse. Compared with the 2019 season, revenues were up 26%. These growth figures were better than for retail overall, underlining the boost jewelry had received during the past year of the pandemic.

“Whether consumers were shopping for themselves or for loved ones, the jewelry sector experienced some of the strongest year-on-year and year-on-two-year growth [in the holiday period],” Mastercard commented.

Polished prices rose across all major size groups. The RapNet Diamond Index (RAPI™) for 1-carat diamonds gained 5.5% between December 1, 2021, and January 3, 2022. RAPI for 0.30-carat stones advanced 1.3%, while the index for 0.50-carat goods climbed 1.4%. Prices of 3-carat items jumped 5.1%.

Diwali strong

India, where most manufacturing takes place, benefited from the upturn by supplying large quantities of polished to consumer markets in October, just before factories shut for Diwali. The country’s polished-diamond exports leaped 45% year on year to $2.56 billion for that month — the highest total since September 2017, according to statistics from the country’s Gem & Jewellery Export Promotion Council (GJEPC).

November was slower because of the Indian festival, with polished exports slipping 21% year on year to $1.3 billion. Diwali closures were longer this past year than in 2020, when a resurgence in demand prompted cutting firms to curtail their breaks. In December 2021, despite the vibrant demand, many Indian manufacturers operated below full capacity because of high costs. Increases in rough prices have made it difficult for them to achieve profitable margins.

Inventory issues

One of the themes of last year was shortages. Miners dug up fewer diamonds: Rio Tinto’s Argyle mine had ceased production in late 2020, while Alrosa and De Beers had operational difficulties at some of its deposits.

Prices for De Beers goods have risen by 23% in “just over a year,” said Mark Cutifani, CEO of parent company Anglo American, in a December 10 investor presentation. Management had predicted a 30% jump over two years, he added. “We think the risk is…that the world is running out of diamonds. There have not been any major discoveries” of new mines.

Some of the uncertainties from the past two years remain. The drop in travel has freed shoppers to spend more on physical goods, but it is also keeping the diamond trade from operating in the usual way. In the final days of December, the Omicron variant of Covid-19 prompted two show organizers to postpone fairs they had planned for January. Italian Exhibition Group (IEG) rescheduled its Vicenzaoro event for March, and the GJEPC said the India International Jewellery Show (IIJS) Signature edition would take place at an undetermined later time.

Still, the overall sentiment was positive as dealers and retailers restocked after the holidays. Chinese New Year, which occurs on February 1, offered another selling opportunity. US traders also looked ahead to Valentine’s Day and the rest of the engagement season, hoping for a repeat of the brisk business they had enjoyed during the pre-Christmas period.

“Market participants see solid demand for bridal jewelry and expect this trend to continue in 2022,” said Evgeny Agureev, deputy CEO at Alrosa.

Article from the Rapaport Magazine - January 2022. To subscribe click here.

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