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A 2014 Year in Review
Dec 28, 2014 3:31 AM
By Avi Krawitz
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RAPAPORT... Rapaport’s widely read Weekly Market Comments is a carefully considered statement reflecting the Rapaport Group’s view on the market and important trends influencing the diamond trade during the previous week. The following is an executive summary of the key developments that impacted the diamond market during each month of 2014, as reported in Rapaport’s Weekly Market Comments:
January
• Polished markets stable with very strong demand for 0.30-0.40ct. diamonds and large inventories building up at GIA.
• U.S. [2013] holiday season good but discounting reduced profit margins.
• Markets optimistic but concerned about higher rough prices reducing profit margins.
• Polished buyers resisting higher prices based on rough.
• Cutters afraid to raise polished prices as Hong Kong-China demand weak and program buyers demand stable prices for stable orders.
• De Beers hikes prices by average 5% as $700M January sight sold out due to pent up rough demand.
• Rough trading stable but manufacturers expected to restrain future buying as bank credit tightens.
• Indian diamond manufacturing below capacity with tight liquidity.
• RapNet Diamond Index (RAPI™) for 1ct. laboratory-graded diamonds +1.2% in January.
February
• Far East sentiment improves after good Chinese New Year jewelry sales.
• Chinese New Year increases sales of affordable jewelry but luxury demand slows.
• Polished markets optimistic with high expectations for important Hong Kong show.
• Polished trading stable with firm asking prices, shortages and selective demand.
• Strong demand for 0.30-0.40ct. GIA dossiers.
• Liquidity improves as inventory levels decline but GIA backlog causing shortages.
• Large volume of polished goods expected to enter market with 50-day backlog at GIA and Indian cutters increasing manufacturing.
• Suppliers hope polished prices will catch up to rough prices, enabling a return of profits to the diamond manufacturing sector as De Beers acts responsibly by keeping rough prices stable.
• De Beers February sight estimated at $650M.
• Petra Diamonds sells 29.62ct. blue rough diamond for $25.6M ($863K/ct.)
• Rough markets very strong and speculative as Indians dominate market.
• Rough prices surging to unsustainable levels as Indian manufacturers make use of easy government supported bank credit that may end in April.
• RapNet Diamond Index (RAPI) for 1ct. +0.3% in February.
March
• Positive sentiment spreads to trading centers after Hong Kong show meets expectations and demonstrates strong Chinese demand for under the carat certs.
• Polished markets optimistic but liquidity under pressure due to tight bank credit and high rough prices.
• Suppliers complain they cannot replace polished at current rough prices, with many buying polished instead of rough.
• Polished markets stable with strong demand for GIA dossiers.
• Dealers shifting to diamond parcels, non-certs. and 0.25ct. sizes due to 0.30ct. shortages caused by GIA delays.
• Far East shifts to lower colors.
• Demand for large diamonds robust as Basel shows begin.
• Liquidity improves but bank credit tightening and cutters concerned steady Hong Kong show will signal further unsustainable rough price hikes.
• Strong Israeli demand for large rough at International Rough Diamond Week.
• Gem Diamonds sells 162.06ct. diamond for $11M ($69K/ct.).
• Antwerp chases Zimbabwean rough supply, strengthens ties with Russia.
• Rapaport Melee Index (RMI) +5.4% to 137.6 in 1Q.
• RapNet Diamond Index (RAPI) for 1ct. +0.8% in March.
April
• Diamond trading very quiet during Passover and Easter holidays.
• Polished markets stable but buyers are increasingly price sensitive as cutters try to raise prices due to expensive rough.
• Far East demand slow ahead of May 1 retail season. U.S. market stable.
• De Beers raises prices 3%-4% at $700M April sight, reducing dealer demand on secondary market.
• Cutting center liquidity tightening due to high rough prices and GIA backlogs.
• Basel shows and auctions signal strong demand for top quality large diamonds:
o Christie's New York sells 22.60ct. & 22.31ct. D, IF pair of circular-cut diamonds for $191K/ct.
o Christie's New York sells a 6.10ct., VVS1 fancy intense-pink rectangular-cut diamond for $5.8M ($945K/ct.).
o Sotheby’s Hong Kong sells brilliant-cut, 30.57ct., D, FL diamond for $6.5M ($214K/ct.).
• Zimbabwe plans UAE diamond embassy as Dubai holds inaugural Marange rough tender.
• Reserve Bank of India removes restrictions on advance payment for rough diamonds to foreign mining companies.
• RapNet Diamond Index (RAPI) for 1ct. -0.5% in April.
May
• Sentiment improves as Dow hits record high.
• Diamond trading stable with good U.S. demand for commercial-quality diamonds but buyers are very price sensitive.
• Indian manufacturers slowly return from vacation while liquidity concerns persist.
• Indian market optimism boosted by Modi election victory.
• Indian jewelers hoping new government will ease gold import rules to help stimulate demand.
• Far East wholesale demand quiet despite robust jewelry sales during May Day holiday.
• JCK Las Vegas show opens amid rising U.S. consumer confidence.
• Rough markets stable following estimated $560M De Beers May sight.
• Auction markets for large stones booming:
o Christie’s Geneva sells pear, 13.22ct., fancy vivid blue diamond for $23.8M ($1.8M/ct.).
o Christie’s Hong Kong sells pair of 25.49ct. and 25.31ct., D, IF, type IIa diamonds for $9.7M ($191,746/ct.).
o Sotheby’s Geneva sells cushion, 100.9ct., fancy vivid yellow diamond for $16.3M ($163K/ct.).
o Sotheby’s New York sells 15.23ct., fancy intense orange pink, VS2 diamond for $6.1M ($400K/ct.).
• Signet buys Zale Corp. for $21 per share (about $1.4B).
• RapNet Diamond Index (RAPI) for 1ct. -0.5% in May.
June
• JCK Vegas show meets expectations despite slower traffic from small independent jewelers.
• Steady U.S. demand for affordable VS-SI commercial goods but trading weak for larger better-quality stones.
• U.S. demand for inexpensive piqué diamonds very strong with prices firming.
• Diamond markets seasonally slow as U.S. vacation period approaches.
• Hong Kong show fails to meet expectations with some price softening.
• Far East market slow with selective Chinese buying.
• Indian retail sentiment improves on stronger rupee and lower gold prices.
• Rough markets stable during $640M De Beers sight.
• Cutters fighting for survival with low profit margins and tight liquidity.
• Chow Tai Fook agrees to buy Hearts On Fire for $150M.
• Rapaport Melee Index (RMI) +1% in 2Q.
• RapNet Diamond Index (RAPI) for 1ct. -0.5% in June.
July
• Diamond markets seasonally slow with limited demand for top quality carat and larger stones.
• The GIA backlog has reduced supply which is preventing lower prices.
• Polished prices coming under increased pressure as some Indian cutters reduce 1ct. and larger prices due to weak demand, oversupply and cash flow requirements.
• Steady U.S. and Far East demand for commercial-quality below 1ct., G-M, SI-I2diamonds.
• Polished trading sluggish as weak Mumbai IIJS show loses appeal for diamond traders.
• Some Indian manufacturers reducing prices for better-quality carat and larger sizes.
• Global diamond markets are quiet with cutters frustrated by high rough prices during sight week.
• Manufacturer margins and liquidity under pressure as rough prices increase in spite of declining polished prices.
• July De Beers sight estimated at $775M with 1%-2% price rise.
• Rough markets stable with seasonal Indian demand for pre-Diwali manufacturing.
• RapNet Diamond Index (RAPI) for 1ct. -2.4% in July.
August
• Diamond trading quiet with Belgian and Israeli dealers taking August vacation.
• U.S. market positive with moderate expectations for India Diamond Week in New York.
• Polished buyers avoiding large inventory purchases before September Hong Kong show.
• Diamond market demand shifting away from expensive better-quality goods toward lower-priced, commercial and promotional qualities.
• Dossiers doing well, although Chinese market is relatively slow.
• Steady U.S. demand for commercial-quality SI-I1 diamonds helping Indian market.
• Market sentiment weak with liquidity difficulties for manufacturers as banks tighten credit.
• Polished suppliers offer greater discounts to generate cash as rough and polished inventory levels remain high.
• Rough trading stable but manufacturer margins tight due to high rough prices.
• De Beers keeps average prices stable at large $715M August sight but rough trading slows and premiums weaken on secondary market.
• RapNet Diamond Index (RAPI) for 1ct. -1.4% in August.
September
• Hong Kong show improves outlook for holiday season but liquidity remains tight with significant buyer price resistance.
• Strong visitor traffic but sales not booming due to stiff buyer price resistance.
• Sellers that reduce prices are selling with some manufacturers lowering prices to generate cash flow as Indian liquidity is tight.
• Steady demand for G-J, VS-SI goods. High-end, D-F, VVS+ very weak.
• Rising concern about financial insolvencies in India as banks tighten credit policies and liquidity remains difficult.
• Polished trading cautious with price-point buyers shifting to lower qualities.
• Cash buyers getting significant discounts.
• Rough trading slows as Surat manufacturers focus on cutting operations ahead of October Diwali season.
• Rough prices decline with some goods selling at 3%-5% discounts.
• Petra Diamonds sells 122.52ct. blue rough stone for $28M ($225K/ct.).
• Rapaport stops listing all EGL grading reports on RapNet Diamond Trading Network, effective October 1.
• KBC Group to close Antwerp Diamond Bank.
• Rapaport Melee Index (RMI) -6.8% in 3Q.
• RapNet Diamond Index (RAPI) for 1ct. -1% in September.
October
• Polished centers quiet over Jewish holidays with sluggish Indian demand ahead of important Diwali holiday season.
• Polished markets under pressure with liquidity concerns as Antwerp Diamond Bank begins shut down process and other banks tighten credit.
• Buyers taking advantage of tight supplier liquidity as polished prices soften.
• Cash buyers gain higher discounts as suppliers seek to boost liquidity.
• U.S. market stable with good demand for commercial-quality SI-I2 diamonds.
• Market for 0.30-0.40ct. cooling as Chinese demand shifts to larger size, lower qualities.
• Hong Kong trading declines as Chinese government restricts currency transfers and cracks down on corruption.
• Golden Week luxury sales dampened as Hong Kong’s pro-democracy protests reduce travel to Hong Kong and close some stores.
• Indian market closes for Diwali with soft holiday sales.
• Rough secondary market weak amid concerns of post-Diwali oversupply.
• De Beers October sight estimated at $460M; few extra goods (ex-plan) sold with more refusals and deferrals.
• ALROSA and De Beers maintain steady prices at October sales with some increases in select items.
• Rough prices discounted on secondary market as sightholders pay for the privilege of steady supply.
• Gem Diamonds sells 198ct., type IIa rough for $10.6M ($53,746/ct.).
• Petra Diamonds sells 232.08ct. rough for $15M ($65,577/ct.) to Diacore.
• Sotheby’s Hong Kong sells 8.41ct., fancy vivid purple-pink, FL [polished] diamond for $17.8M ($2.1M/ct.).
• RapNet Diamond Index (RAPI) for 1ct. -2.2% in October.
November
• Polished prices under pressure after relatively weak Indian Diwali and Chinese Golden Week.
• All eyes and hopes are on the U.S. retail market.
• Polished markets unusually slow before holiday season.
• Dealers not buying for inventory.
• Memo sourcing becoming more important given selective demand and tight market liquidity.
• Liquidity situation significantly worsened by China’s restrictions on money transfers.
• Market for fancy shape and fancy color diamonds improving with increasing dealer demand due to oversupply and limited profitability of rounds.
• Cutters offering lower prices to improve cash flow and buy high-priced rough in order to maintain next year’s sight allocations.
• De Beers holding rough prices steady at small $550M November sight with some rejections.
• Special stones smash more records at auctions:
o Sotheby’s Geneva sells pair of oval, 20.05ct. and 20.06ct. D, IF, diamond earrings for $7.1M ($178,188/ct.) to Graff.
o Sotheby’s New York sells pear, 9.75ct., fancy vivid blue, VVS2 diamond for record $32.6M ($3.3M/ct.).
o Christie's Geneva sells pear, 6.95ct., fancy vivid blue, SI2 and pear, 6.79ct., fancy pink, VS2 ear pendants for $15.8M to Graff.
• Markets expect steady rise in Internet jewelry sales this holiday season.
• RapNet Diamond Index (RAPI) for 1ct. -1.7% in November.
December
• Dealers adjusting their expectations to meet new realities.
• Global demand is weak and there is an oversupply of diamonds throughout the distribution chain.
• Buyer’s market prevails with great opportunities for aggressive traders willing to take positions.
• Healthy U.S. market supporting the industry.
• Polished market weakens with Thanksgiving weekend sales -11% to $50.9B, Cyber Monday online sales +17% to $2B as consumers move online.
• Widespread discounting as U.S. jewelry retailers hope to boost mediocre holiday season.
• Polished prices under severe pressure with sharp drop in trading as buyers demand lower prices.
• Sellers lowering prices as demand for cash exceeds demand for diamonds.
• While some hot spots persist, overall market sentiment is negative.
• Markets unstable due to imbalance between rough and polished prices.
• Rough prices out of line forcing cutters to reduce polished prices to maintain liquidity.
• Situation unsustainable as sightholders overpay for rough to ensure future supply in 2015, while polished demand declines.
• Rough prices coming down as sightholders reject about 20% of overpriced rough at estimated $600M De Beers December sight.
• De Beers rough price index +7% in 2014.
• ALROSA to raise rough supply to India as Mumbai gets special rough trading zone.
• Christie’s New York sells pear, 89.23ct., D, VVS1 selling for $11M ($124K/ct.).
• Sotheby’s New York sells 25.44ct., D, VVS1 selling for $3M ($117K/ct.).
• U.S. sentiment improves as Dow surpasses 18,000, reaching record high after economy surges +5% in 3Q.
• RapNet Diamond Index (RAPI) for 1ct. expected to decline in December.
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Tags:
Alrosa, Avi Krawitz, Chow Tai Fook, De Beers, diamonds, Jewelry, Rapaport, Signet Jewelers, Tiffany & CO.
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