The diamond trade suffered a downturn in August as consumer sentiment weakened and manufacturers continued to be uncertain about the market. Inflation in the US hit shoppers’ spending, while China was still recovering from its Covid-19 lockdowns. Still, the overall picture was optimistic compared with the slumps the industry had seen during the height of the pandemic.
“A cautious economic outlook combined with the uncertainty caused by geopolitical events, including the conflict in Ukraine and continuing implications of the Covid-19 pandemic — specifically in China, where the demand for diamonds has not yet recovered — remain a risk to diamond-pricing trends in the short term,” Lucara Diamond Corp. said August 10 in its second-quarter results. However, it added, “the longer-term price outlook remains positive.”
Polished prices declined during the month. The RapNet Diamond Index (RAPI™) for 1-carat diamonds dropped 2.8% between August 1 and 23. RAPI for 0.30-carat goods slipped 2.4%, 0.50-carat stones fell 2.8%, and the 3-carat category slid 1.8%.
In the US, traders reported a slowdown in 1-carat bread-and-butter goods as consumers who would normally have bought mid-market items felt the pinch from the higher cost of essentials like food and gas. At the same time, 3-carat diamonds and larger performed better, as high-end shoppers still had discretionary income. In fancy shapes, 0.30- to 1.20-carat stones saw a decline.
Weakening rough
The rough sector showed signs of waning. Premiums on the secondary market cooled, as buyers were unsure whether the polished would be sellable, especially given the lack of Chinese orders. Demand dipped during the De Beers August sight, though the miner did not make significant price changes.
“Consumer demand for diamond jewelry continues to be strong, though inflationary conditions may have [a] further dampening effect going forward,” said Sarine Technologies, which produces diamond-manufacturing equipment. “US retailers remain cautiously optimistic regarding the end-of-year holiday season.”
Trading centers felt the effects of the downward trend. Israel’s polished exports — after returns of unsold goods — fell 7% year on year to $296.6 million in July as global appetite faltered. Rough exports slid 10% to $127.9 million.
“After around a year and a half of consecutive increases, the past few months have shown signs of uncertainty about the global situation,” said Ophir Gore, Israel’s diamond controller, who regulates the trade at the Economy and Industry Ministry. “I believe the situation will become clearer in the coming months.”
Beyond the Summer
Most diamond exchanges around the world were quiet in August as dealers went on vacation. Belgium’s bourses had their usual summer shutdowns, while Israel’s was partially closed.
The focus turned to the Jewellery & Gem World (JGW) show, which was set to take place in Singapore this September because of Covid-19 restrictions in its usual venue, Hong Kong. Traders were unsure whether the event would have the same gravitas as the Hong Kong fair, since it was unclear whether Chinese buyers would be able to attend. Meanwhile, dealers prepared for some of the smaller upcoming events, including Italy’s Vicenzaoro in September and the November GemGenève show in Switzerland.
Sentiment was relatively high ahead of the holidays, as US consumers were keen to shop at physical stores in the post-lockdown era. The US market looked ready to support the global industry amid weakness in the Far East.
“The latest retail trends place an emphasis on consumer choice and passion-driven spending,” said Steve Sadove, senior adviser for Mastercard. The company’s monthly SpendingPulse report estimated a 19% year-on-year increase in US jewelry sales for July. “They’re hunting for deals, shopping across channels and ultimately still spending on experiences and goods that make them feel good,” he said.
Article from the Rapaport Magazine - September 2022. To subscribe click here.