Rapaport Magazine
Markets & Pricing

A seller’s market

Miners can’t deliver product fast enough as US retail demand strengthens, driving up diamond prices.

By Joshua Freedman
January was a phenomenal month for the diamond sector — unless you were trying to buy. Demand was strong as retailers restocked after the holidays, and goods remained in short supply. Both rough and polished prices rose sharply as a result. These factors meant retailers and dealers had a hard time replacing inventory, while manufacturers struggled to profit as their rough costs increased relative to polished values.

The RapNet Diamond Index (RAPI™) for 1-carat polished diamonds — reflecting average asking prices for D to H, IF to VS2 stones on the trading platform — jumped 6.8% between January 1 and 31. The index for 3-carat goods climbed 7.1%. The increases were gentler in the smaller sizes, with 0.30-carat items rising 0.8% and the 0.50-carat category gaining by 2.9%. The lower-quality categories, which don’t contribute to the RAPI, continued to go up in value, reflecting buoyant US consumer demand. The American jewelry market, which skews toward items with lower color and clarity, enjoyed one of the best holidays on record.

Chasing rough

The rough market heated up, as miners couldn’t produce enough stones to meet the demand. Alrosa and De Beers both hiked prices at their January contract sales, with lower-quality goods advancing by almost 20% in some areas. Supply volumes at the Alrosa trading session were far smaller than clients’ contracted allocations; the shortfalls reached up to 30% for lower-quality diamonds, buyers reported.

“The industry, especially manufacturers, made a very decent profit in 2021, so they are in a good mood to continue the same volume of business in 2022,” a rough dealer told Rapaport Magazine. “There is [also] a shortage of rough in the market. So each manufacturer is chasing rough.”

Activity on the open market — at tenders rather than contract sales — was also robust as the midstream sought goods to fill inventory gaps.

Grib Diamonds, which sells production from AGD Diamonds’ Grib mine in Russia, saw solid demand for its rough at an Antwerp sale in January. The tender featured goods of up to 10.79 carats, with prices soaring 50% over equivalent items from its previous auction in September, management stated.

Meanwhile, Trans Atlantic Gem Sales (TAGS) said its January tender in Dubai had sold out, with prices exceeding expectations.

“This [performance] has come as a result of positive polished sales in the major consumer markets over the Christmas period, coupled with a limited availability of rough in the markets,” TAGS commented. “While we saw strong rough demand across the full range of qualities and sizes, there remains a particular focus on the cheaper ranges.”

Cause for celebration?

The retail boom looked set to continue. Signet Jewelers’ sales remained strong in January, with growth in the “high single digits,” according to the company.

However, questions remained about the Chinese New Year, which took place on February 1. Dealers predicted that festive retail sales on the mainland would be lower than in 2021 — reflecting a slowdown in economic growth during the final months of last year — but still above pre-pandemic levels.

In Hong Kong, the consumer market showed more signs of recovery, though the lack of tourism continued to restrict activity. Retail sales of jewelry, watches, clocks and other valuable gifts in the municipality jumped 24% year on year to HKD 3.82 billion ($491.1 million) in December. However, the total was still far lower than before the Covid-19 crisis.

“The latest wave of the local epidemic and the tightened anti-epidemic measures have weighed on consumption sentiment and [imposed] renewed pressures on the retail sector,” said a Hong Kong government spokesperson.

Results from the lunar festival in both mainland China and Hong Kong will provide an idea of the regional jewelry market’s health. Yet even without the Far East, the global diamond industry appeared to be enjoying enough demand from the US to keep the momentum going for a while.

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

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