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Market Comments 8/16/2012
Aug 16, 2012 6:00 PM
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Low expectations for next week’s India show as polished suppliers remain under pressure in weak buyer’s market. Rough trading quiet as ALROSA lowers 2Q supply to the market and approves sale of $130M to Gokhran (Russian Treasury) for first time since 2009. Global gold jewelry demand -9% to $21.7B in 2Q, volume -15% to 418.3 tons as Indian & Chinese demand slumps. Gitanjali 1Q sales +31% to $612M, profit +21% to $27M. Shrenuj 1Q sales +6% to $129M, profit -34% to $2M. Hong Kong’s 1H polished imports -1% to $8.5B, exports -7% to $6.1B. De Beers shifts diamond sorting operations from London to Gaborone. Botswana appoints Toby Frears as managing director of Okavango Diamond Company.
Fancies: Fancy market doing relatively well as significantly lower prices than rounds attract value conscious buyers. Cushions are very hot with supply shortages. Weak demand and lower prices for rounds are encouraging manufacturers to shift production back to fancy shapes. Dealers report fancy shape market for excellent shapes and cuts is better and more profitable than round markets. Large fancies stones relatively stable but sales and liquidity are weak. There are extreme price differentials between excellent/fine and average cut fancy shapes. Fine cut stones may not be available as suppliers tighten discounts and resist lower prices. Square cuts doing better than curves.
Global Markets
United States: Polished trading is stable and demand is steady relative to other markets. There remain deep concerns about economic trends, particularly the impact that prolonged high unemployment might have on consumer spending, especially given the recent pull-back among wealthy consumers. Still, the outlook for the second half of the year is stable and many are hoping consumers will still splurge come the end of year holiday period. Some jewelers have expressed concern about a pending shortage of supply given reports of tight liquidity and slow manufacturing in the cutting centers, particularly for SI and lower clarity goods.
Belgium: Trading in Antwerp remains quiet as the bourses are scheduled to resume services only next week (August 19), when the annual summer vacation period ends. Suppliers are hoping that next week’s Mumbai show will signal some polished price stability that will filter to other markets through the rest of 2012. Similarly, manufacturers are waiting for the next sight cycle toward the end of August to assess trends in the rough market.
Israel: Trading continues to be quiet during the August vacation and many companies have taken the opportunity to carry out office renovations during this period. Many are encouraged by signs of stability and are hoping that the market will improve next week when the bourse reopens on August 19, and as they start to prepare for the September Hong Kong show. However, dealers remain cautious given the market weakness experienced during the past two months but would like to believe that the overall uncertainty will diminish with the upcoming Mumbai and Hong Kong shows.
India: Polished trading was restrained this week with national holidays limiting activity. Dealers are cautious as liquidity remains tight and expectations for next week’s Mumbai show are subdued. There has been some demand for small-size goods from Antwerp-based Indian buyers but overall demand from foreign buyers has been weak. Rough trading is also quiet due to price uncertainty and as De Beers and ALROSA goods are offering only small premiums, if at all. Manufacturers are cautious in their rough buying, given their high inventories and the weak polished market, and they are keeping manufacturing levels below capacity. There is select trading in rough goods which yield polished -11 sieve size, SI and lower category.
China: Vacations in Belgium and Israel have impacted diamond trading in Shanghai and both the wholesale and retail markets remain relatively quiet. Buyers are holding back from large inventory purchases out of concern that prices will soften further and are eyeing trends at next week’s Mumbai show with interest.
Hong Kong: Retail activity has slowed in August due to economic uncertainty and as many residents travel while tourists from Mainland China opt for other locations during the hot summer period. Some jewelers note that consumers are sensing an opportunity to buy diamonds given that prices have softened in the past two months. As a result, there is some optimism that polished trading will improve ahead of the October 1 Golden week period, particularly as Mainland tourism is expected to rebound in the second half of the year.
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