The diamond market saw an upturn in December after a troublesome year. Polished inventory decreased as manufacturers showed caution in their production activities following the Diwali break. Demand was steady as the holidays entered their peak, though trading slowed in the latter half of the month as businesses closed for Christmas.
While polished prices declined for the year, the market for smaller goods recovered in the final month. The RapNet Diamond Index (RAPI™) for 0.30-carat stones increased 1.7% between December 1 and 29, with RAPI for the 0.50-carat category rising 1.1%. The index for 1-carat diamonds slipped 0.1%, while prices of 3-carat stones declined 0.6%.
The year will still go down as “one of the worst…in the diamond industry’s history,” to quote Dudu Harari of rough brokerage firm Bluedax. The huge inventory burden that weighed on the midstream for much of 2019 was a major contributor, prompting De Beers to allow sightholders to reject more goods than usual.
Pickup for miners
“The only thing that saved the market from a complete meltdown was the mining companies’ policy of cutting supplies and reducing the level of rough and polished stocks,” Harari said in a December 19 market report.
Manufacturers are now looking for rough because of their lower inventory levels, another rough broker told
Rapaport Magazine on condition of anonymity. At the same time, De Beers’ November price reduction made the miner’s goods more profitable, supporting demand at the December sight.
Prices of Gem Diamonds’ rough have improved from this
year’s “unprecedentedly low levels,” added Clifford Elphick,
the mining company’s CEO, in a corporate video the firm published in early December. “[At] our tender [in November], we saw some price pickup, and I hope that is the beginning of
the turnaround.”
Some of the inventory difficulties of 2019 are likely to linger into 2020. The opportunity for a more complete recovery will come in 2021, when the Argyle mine in Australia closes and production falls at the Diavik and Ekati deposits in Canada, consultancy firm Bain & Company explained in its annual “Global Diamond Report” last month.
Retail uncertain
The perfect storm of 2019 came amid a US-China tariff war — which impacted Chinese tourist spending due to the weaker yuan — as well as protests in Hong Kong that brought the local luxury industry to a near standstill. At the same time, retailers were holding less inventory, taking more goods on memo and using e-commerce options.
The holiday season appeared to offer some respite, with US jewelry sales rising 1.8% year on year for the period from November 1 to December 24, according to Mastercard SpendingPulse. Tiffany & Co. also reported a rise in sales for the season.
However, 2019 as a whole may still be a year of decline, with Bain estimating a 2% drop in global diamond-jewelry retail sales, subject to holiday performance. Its prediction for the coming year was also cautious.
“The midterm outlook for 2019-20 remains uncertain given continued geopolitical instability, strong signs of an impending recession, and limited marketing support, especially for non-branded and lower-end jewelry,” Bain concluded.
Article from the Rapaport Magazine - January 2020. To subscribe click here.