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Rapaport TradeWire December 21, 2012

Dec 20, 2012 6:00 PM   By Rapaport
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Retail & Wholesale General India EconWatch Mining
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Rapaport Weekly Market Comment Dec. 21, 2012

U.S. market steady with consistent orders from major retailers amid concern increased taxes will significantly reduce consumer demand for luxury products. Demand for 0.30-0.40ct., H+, VS+ certs. improving as Chinese New Year approaches. ABN Amro Bank in dispute with Arjav Diamonds Belgium with claims of $154M and Arjav counterclaim of $230M. ALROSA sells $140M rough to Gokhran in 2012. India’s Nov. polished exports +20% to $1.4B, rough imports -22% to $892M. Philippe Mellier, Varda Shine to address DMIA NY Jan. 8 meeting.‎ Happy Holidays. Caution: Prices for green, grey and brown tinted diamonds 10-15% below non-tinted. Green tint often indicates Marange origin.

RapNet Data: Dec. 20
Diamonds   982,674
Value $6,160,015,420
Carats   1,063,919
Average Discount -27.55%

RapNet Asking Price

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Launching Rapaport Jewelry Auctions

Closeout and Estate Jewelry

January 21-25, New York
January 28-29, Miami
Excellent Buying Opportunities

For more information, please call +1-702-893-9400

An Evening with Philippe Mellier and Varda Shine

New York City
Hosted by DMIA at 5:30 p.m.
Venue to be announced shortly.
Reservations are required.
Email Alla Sachakova for seating.

  These [new executive] appointments mark a significant step forward for the company as we prepare Okavango Diamond Company for its commercial launch next year. Our newest team members reflect the rich blend of national and international skills that ‎we require to ‎build a sustainable and globally competitive new diamond sales channel ‎here in Botswana. ‎

Jacob Thamage | Okavango Diamond Co.

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants, and entry level positions for our offices in New York, Antwerp, Mumbai, Dubai, and Shanghai. View jobs now.

De Beers Dec. Sight at $490M

De Beers Diamond Trading Company (DTC) December sight had an estimated value of ‎‎$490 million with sightholders still concerned about their ability to profit from ‎manufacturing. ‎Sightholders are reluctantly accepting goods as there is no or very little profit. Prices were basically stable with slight ‎declines on select items, such as colored and brown goods. Still, a changed assortment resulted in more expensive boxes.
The small sight came after De Beers reported that it will be unable to fulfill sightholders’ ‎intentions to offer (ITO’s) that were submitted for the contract year beginning April 1, ‎‎2012, as the company reduced production during the period of weak demand. ‎Sightholders are currently working on submitting their applications for goods during the ‎next ITO.‎ De Beers also invited eligible customers of its Diamdel rough auctions to ‎apply for a sight during the remainder of the 2012 to 2015 contract period.

Rapaport estimates that De Beers rough sales through DTC declined 12 percent to $5.2 ‎billion for the full year. ‎

ABN Amro, Arjav Diamonds in Commercial Dispute

ABN Amro ordered Belgium authorities to seal the safes of Arjav Diamonds in Antwerp after negotiations failed regarding the firm's credit with the bank. ABN Amro initiated action to collect  $154 million from Arjav, while Arjav countered with a damage claim against the bank for $230 million.

Arjav’s total bank debt in Belgium amounts to $385 million, the largest portion being held with ABN Amro. Arjav’s credit with Standard Charter Bank amounts to $150 million, with the remainder split between ICICI Bank, Bank of India, and the State Bank of India. Arjav stressed that its dispute is only with ABN Amro. The bank declined to comment on individual clients.

Arjav Diamonds is one of Antwerp’s largest diamond manufacturing and trading ‎companies and has a De Beers London sight in addition to buying rough from ALROSA, ‎Harry Winston and BHP Billiton. ‎ABN Amro is one of the primary lending institutions serving the diamond trade, with a ‎presence in most key diamond centers, including in Antwerp, Dubai, New York, ‎Botswana, Hong Kong and Mumbai. ‎

Rosy Blue Signs Supply Deal With ALROSA

Rosy Blue signed a new rough diamond supply ‎deal with ALROSA to supplement its supply from De ‎Beers and BHP Billiton, among others. Rosy Blue specializes in rough and polished diamond trading, diamond-cutting and jewelry manufacturing. The company’s revenue exceeded $2 billion in 2011. Rosy Blue also buys rough from De Beers, through the Diamond Trading Company (DTC) sights in London, and has been ALROSA’s long-term client since 2010.

Jewelry Inflation -2%

The U.S. consumer price index (CPI) for jewelry fell 2% year on year in November to 177.7 points in response to marginally weaker prices for precious metals and continued softness in polished diamond prices during the month. The index was 1.52 points lower than October's reading. Nonetheless, the CPI remains at historically high levels and November's measure marked 23 consecutive months of a reading of more than 170 points. The CPI reached a record 185 points in January, but then prices for polished diamonds, gold and platinum have since remained under pressure.  

Jewelry Stores Sales +8%

U.S. jewelry store sales rose a healthy 8.3% year on year for the month of October to $2.176 billion, while jewelry price inflation fell 1.3%. Jewelry store sales have improved 4% year on year to $21.888 billion for the first 10 months of the year and consumer price inflation (CPI) for jewelry has held close to 2%.

Meanwhile, for the month of November, which kicked off Christmas-season spending in the U.S., department store sales fell 0.9% year on year to $18.079 billion. U.S. retail and food services sales for November, adjusted for seasonal variation but not for price changes, rose 3.7% year on year to $412.4 billion. Retail trade sales increase 3.4% in November. Nonstore retailers experienced an 11.1% jump in sales compared with November 2011.

Group Lowers U.S. Retail Growth Estimate

ShopperTrak lowered its Christmas-season sales predictions following a 4.4% decline in foot traffic and a 4.3% drop in retail sales this past week. Nonetheless, this coming weekend in the U.S. should be the busiest of the entire season, according to the company. ShopperTrak now forecasts Christmas-season sales for the months of November and December combined to increase by about 2.5% year on year, which is down from an earlier forecast of 3.3%.

Russian Crown Jewels Discovery

WATCH NOW: In this week's Rapaport news broadcast, MVI Marketing Ltd. unveils the winners of its inaugural USA Jewelry Social Media Awards. Top performers include Cartier, Tiffany & Co. and HSN. Also the U.S. Geological Survey (USGS) located four previously undiscovered photos of undocumented Russian Crown Jewels. The photos appeared in a 1922 album called “Russian Diamond Fund” and have historical implications for the overall collection.

Bain: Diamond Growth at 6% Through 2020

Bain & Co., in collaboration with the Antwerp World Diamond Centre, conducted a study on diamond and jewelry trends and found distinct patterns emerging. Consumers in the U.S. and E.U., the most saturated markets, were less concerned about authenticity of a stone, but were most concerned with a brand's quality of service. Shoppers in China and India, where penetration is emerging but still minimal, the quality certificates for diamonds is the most important issue, followed by selection and design.

Bain said only the strongest will survive in the U.S., where the  popularity of diamond jewelry is competing with  a growing preference for other luxury goods, just as the specialty retail sector consolidates, and Internet outlets and discounters Walmart, Costco and Target increase their share of jewelry sales. Meanwhile, diamond jewelry in China and India is seen by shoppers as smart investment, Bain concluded.

Affluents are driving the diamond market in China, but the country offers a tremendous opportunity for diamond retailers as women increasingly associate diamonds with  status. Indian shoppers love jewelry and their taste is well developed, said Bain. Preferences are shifting from gold jewelry to diamond jewels featuring solitaires.

Bain projected that worldwide demand for diamonds through 2020 will grow 5.9% annually to $26 billion (at 2011 prices), and outstrip supply growth of only 2.5%. Historically, supply deficits have led to firm prices. Threats to the market include persistent high unemployment and sovereign debt, volatile capital markets and listless economic growth. Development of an investment market for diamonds could lead to an  increase in demand, which in turn could drive prices higher and create an even stronger outlook for producers. 

Zale Defends Advertising Claim

Zale defended its ‘‘the most brilliant diamond in the world'' tagline for the Celebration Diamond during a preliminary injunction hearing, the first court appearance in a civil suit filed by Sterling Jewelers in November. Witness testimony was introduced by both sides and Zale presented its study of 51 Celebration Diamonds in its defense.
Sterling, however, argued that there were no industry standards defining brilliance and that Zale's study was inadequate. Citing previous advertising claims for terms such as ''waterproof,'' ''flame resistant'' and ''hand-made,'' where industry standards had not been defined, courts issued injunctions to prevent false impressions and consumer confusion. Sterling seeks court order to prevent Zale from making the most brilliant claim and alleges its biggest U.S. competitor has violated the Lanham Act with false advertising.

Kalyan Opens New Showroom

Kalyan Jewellers opened a showroom in Vadodara, expanding its retail presence in India’s western state of Gujarat to three. The new showroom, which was recently inaugurated by Bollywood actress Aishwarya Rai Bachchan, covers 15,000-square-feet of space. Bachchan is also the national brand ambassador of Kalyan Jewellers. Kalyan operates 44 retail chains and is looking at opening six more showrooms during this financial year, which ends in March.

Lux Leaves Gemesis

Stephen D. Lux stepped down as the chief executive of Gemesis, but a replacement has not been named. The company's director of marketing, Martin DeRoy, said, business was operating as usual following an exciting year of growth. Gemesis launched a Facebook page its page this past spring an attracted 75,000 fans so far. The company also cited high-profile product placements in  consumer press, on TheKnot and with celebrities.

ODC Names Executive Team

Botswana’s Okavango Diamond Company (ODC) appointed an executive team for when commercial rough diamond sales commence in 2013. Marcus ter Haar was named the company's deputy managing director, Susanne Swaniker-Tettey was chosen as chief financial officer,  Timothy Lee will be sales manager, Andrew Faulkner will run operations,  Victor Potgieter was named commercial manager, Shatho Sebina was chosen as security manager and Paul Champane will oversee information technology.

ODC was established in March as a key part of the Botswana’s plans to ‎establish diamond trading and other diversified diamond-related activities in the country. 

Merlin Secures Funding

Merlin Diamonds Ltd. entered into an $8.5 million convertible note with an international investor. The funding is expected to recommence mining operations at the Merlin diamond mine in Northern Territory, Australia, according to the company's announcement. The note carries for one year and bears an interest rate of 6.5%, payable quarterly. The notes can be converted into fully-paid ordinary shares during the period at a conversion price of 22 cents. Additionally, Merlin Diamonds placed 43 million paid ordinary shares at 21 cents each with four investors, raising $9.5 million.

Firestone Tender Nets $2M

Firestone Diamonds sold 16,333 carats of rough goods for $1.6 million or an average $96 per carat at its most recent tender held in November. An October tender of 47,658 carats achieved an average of $75 per carat. All of the parcels auctioned during the past two months were sold, but large, expensive stones were withheld.

Lucara Tender Nets $12M

Lucara Diamond Corp.'s recent sale of diamonds from the Karowe mine in Lesotho fetched $12 million and was 90% sold by lot. The company reported that a total of 62,238 carats sold for an average price of $273 per carat.  Six parcels containing 18,233 carats of finer-size fraction diamonds were withheld due to low levels of competitive bidding.

Ge Nyame to Mine Marange

Zimbabwe reportedly awarded Ge Nyame of Ghana a diamond-mining license in the Marange alongside the Zimbabwe Mining Development Corporation (ZMDC). Ge Nyame is carrying out exploration work and mining activities are expected to start in February, according to the state-run Herald. The ZMDC is sanctioned by the U.S. and E.U.

Diamond Industry Stock Report

U.S. retail was mixed as investors looked for signs of a Christmas boost. Birks -6%, Blue Nile +6%, JCP -3%, PureFunds +2%, Tiffany +2%. European jewelry retailers were higher, but Indian shares were mostly flat. Shares were mostly higher for diamond-miners Lucara -2%, Rockwell +4%, Petra +2%, Stellar +4%. Read the extended industry stock report for this past week.
  Dec. 20 Dec. 13 Chng.  
$1 = Euro 0.755 0.760 -0.005  
$1 = Rupee 54.86 54.49 0.4  
$1 = Israel Shekel 3.74 3.79 -0.05  
$1 = Rand 8.48 8.67 -0.19  
$1 = Canadian Dollar 0.99 0.98 0.01  
Precious Metals        
Gold $1,648.50 $1,696.90 -$48.40  
Platinum $1,546.00 $1,612.00 -$66.00  
Stock Indexes       Chng.
BSE 19,453.92 19,229.26 224.66 1.2%
Dow Jones 13,311.72 13,170.80 140.92 1.1%
FTSE 5,958.34 5,929.61 28.73 0.5%
Hang Seng 22,659.78 22,445.58 214.20 1.0%
S&P 500 1,443.69 1,419.45 24.24 1.7%
Yahoo! Jewelry 1,116.13 1,119.48 -3.35 -0.3%

Polished and Rough Trading Activity

The market is slow overall with better trade for small sizes as Indian buyers from Antwerp are visiting. Steady activity for Dossiers mainly in VS/SI. New production is entering the market in smaller quantities as most of the manufacturing units have started operations. The Arjav Diamonds case has, so far, no impact on Indian market, as Blue star is fully operational in India. Read the full report.


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