Rapaport Weekly Market Comment

Diamond markets
quieter than usual in January. Dealers cautious amid sluggish US post-holiday
demand. Far East orders slow as jewelers
focus on Chinese New Year sales. Decline in Chinese tourist spending sees Tiffany
& Co. Nov./Dec. sales -1% to $1B. Luk Fook 3Q same-store sales -10%. JBT reports US industry shrinks 4% to 25,102 jewelers in 2018. Rough
sentiment weak as manufacturers face
tight profit margins, high inventory and less financing. Indian bank credit down
30% due to weaker rupee and change in lending policy. De Beers 2018 production
+6% to 35.3M cts., sales volume -4% to 33.7M cts. Alrosa 2018 output -7% to 36.7M
cts., sales volume -8% to 38.1M cts.

Fancies: Fancy-shape market stable, driven by US and European demand for
fashion jewelry. Ovals are best sellers, followed by Emeralds, Cushions and
Pears. Supply shortage supporting prices for Pears. Radiants improving.
Marquises and Princesses weak. Oversizes selling well. Steady demand for
fine-quality 6 to 10 ct. Ovals, Pears and Emeralds, with prices firming for 3
to 5 ct. due to shortages. Chinese consumers seeking fancy shapes at better
prices. US supporting market for commercial-quality, medium-priced fancies
under 1 ct. Off-make, poorly cut fancies illiquid and hard to sell, even at
very deep discounts.

United States: Polished trading improving as dealers
return from New Year break. A lot of goods out on memo, with suppliers waiting
to see if they convert to sales. Stable demand for 1 ct., G-J, VS-SI, RapSpec
A3+ diamonds. Uncertainty due to government shutdown and disappointing holiday
sales by the major jewelers. Retailers preparing inventory for Valentine’s Day,
with focus on engagement and bridal collections.

Belgium: Dealers more optimistic as activity
picked up since New Year. Buyers looking for goods, with steady demand for
commercial-quality, 1 ct. and larger, G-H, SI diamonds and shortage of
excellent-cut polished.Melee improving. 0.30 to 0.49 ct. dossiers slow.
Rough trading cautious, with prices for goods below 3-grainers softening on
secondary market during De Beers sight.

Israel: Suppliers uncertain about 2019 prospects
due to slow trading and new diamond tax. Dealers hoping next week’s
International Diamond Week will boost sales and help reduce stock. 0.30 to 0.49
ct. slow and prices softening. Stable demand for 0.70 to 1.50 ct., G-J, VS-SI
diamonds, with shortages in certain qualities. Rough market quiet.

India: Dealers concerned about slower-than-normal
January trading. Far East demand quiet before Chinese New Year. Selective post-holiday
restocking by US retailers. SI-I1 doing well in most sizes. Melee market stable
and showing signs of improvement. Manufacturers holding large inventory and
maintaining lower polished production.

Hong Kong: Polished market stable, but wholesalers and jewelry manufacturers
starting to close for Chinese New Year. Dealers expect improvement when they
return for the Hong Kong show, which begins Feb. 28. Stable demand for 0.30 to
0.70 ct., E-G, VS-SI, 3X diamonds. 1 ct., F-H, VS-SI also selling well. Focus
on boosting retail sales during peak season, with concern that Chinese tourist
spending has softened.