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Market Comments 1/26/2012

Jan 26, 2012 6:00 PM  
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TRADE ALERT: INDIAN CUSTOMS AUTHORITIES RESTRICTING POLISHED DIAMOND IMPORTS. DO NOT SHIP POLISHED DIAMONDS TO INDIA WITHOUT CLARIFICATION. De Beers reduces prices and changes assortments at estimated $650M sight as 4Q production -24% to 6.5M Cts. and total 2011 production -5% to 31.3M Cts.  Indian markets confused and concerned with expectations of lower polished prices. Rough trading weak and polished markets cautious. Chinese New Year begins with high expectations for retail jewelry sales, while wholesale trade closes. Letšeng 4Q sales +2% to $83M but average prices -23% to $2,543/ct. Surat’s SRDSIL auctions 46,000 Cts. of Zimbabwe and Russian rough for $17M.

Global Markets

United States: Wholesale trading is steady but slow. Margins are tight. Buyers with cash are better positioned to obtain the goods they need at a more reasonable price as suppliers are tightening their credit lines. Retailers are carefully monitoring their inventories as they remain concerned about the effect that the weak economy will still have on the market. Many seem willing to wait through the first quarter before raising their buying levels. Still, they are selling goods, with engagement and bridal goods accounting for the bulk of their sales. There is steady demand for dossiers and 1-carat to 2-carat, G-H, VS2-SI1 stones and improving demand for fancies, in particular cushions and princess cuts. 

Business activity is stable but still below levels seen a year ago. Dealers are cautious about the year ahead and uncertain about how to manage their inventories. Some manufacturers are still holding inventory from the fourth quarter and seem prepared to stay firm on prices until their margins improve. As a result, they are buying only what they need. There is good demand for 0.30-carat to 2.00-carat, D-I, VS-SI polished stones, and some demand for small size, high color and clarity goods from Swiss watch-makers.

Israel: Trading in the bourse has slowed influenced by reports that De Beers lowered its prices at this week’s Diamond Trading Company (DTC) sight. Dealers are uncertain about what goods were affected and how the reductions will impact the polished market. An ongoing police investigation into a bank’s alleged fraudulent operations in the bourse has also dampened confidence among traders. There are buyers in the bourse as overall demand is stable, but the usual impulse to close deals is lacking. With the U.S. holiday season over and the Far East wholesale market on holiday over the Chinese New Year, local traders are looking at the February Hong Kong show as the next strong selling opportunity.

Polished trading slowed as the market focused on the DTC sight. There was some demand from U.S. and Israeli buyers but demand from Europe remains weak, while the Far East market is closed due to the Chinese New Year holiday. Local buyer sentiment has improved due to the recent appreciation of the rupee against the U.S. dollar, but they are still cautious as they expect continued currency volatility. There is some demand for rough to cut into fancy shapes, which are in short supply. However, overall rough trading remains weak. Dealers are expected to wait a few days to assess the impact of the DTC sight on the market before making any large purchases.

Diamond trading has basically closed for the Chinese New Year holiday that started on Monday, January 23. The industry’s focus has shifted to the retail market and there are high expectations that consumers will loosen their purse strings, particularly in the luxury sector and especially for better known brand products. At the same time, retailers are pushing strong discounts and heavy promotions to boost sales. Ahead of the festival, retailers were buying gold jewelry as they expected increased consumer demand for gold during the period. They have been careful to keep their diamond inventories low as they remain cautious about the market.

Hong Kong: Wholesale diamond trading is slow with most businesses closed for the Chinese New Year. Many are also waiting for the Hong Kong jewelry show, which was moved from March to February this year, to do their buying. In the past few weeks there has been a shift toward cheaper goods with better demand for lower color and lower clarity stones. There is a slight shortage of SI clarity goods that are suitable for the Far East market. In general, there is steady demand for dossier certified stones below 1 carat, G-, VS-SI. Retail sales have improved with many tourists from Mainland China visiting during the New Year period.

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