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Market Comments 7/16/2015

Jul 16, 2015 6:00 PM  
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Cutters under pressure as De Beers maintains unsustainable high rough prices. Reports have sightholders refusing 35%-50% at July sight which may be as low as $200M. Sightholders buying polished at reduced prices rather than expensive rough. Polished prices low, inventory high with steady demand for U.S. goods that will be in tight supply as new production plummets. De Beers 1H rough sales -26% to 14M cts., average price +7% to $206/ct., production -3% to 15.6M cts. Rio Tinto’s 2Q diamond production +23% to 4.7M cts. Luk Fook’s 1Q same-store sales -20%. Belgium’s June polished exports +2% to $1.4B, rough imports -19% to $1.1B. Russia’s finance minister appointed ALROSA chairman.

Fancies: Ovals and Cushions steady, Pears and Princess improving, Hearts slow. Prices for curves improving slightly. U.S. demand supporting market for commercial-quality fancies, especially for sizes under the carat. Larger sizes softening. Far East fancy demand weak. Buyers are very selective and insisting on excellent-shape proportions. Significant price differentials between excellent- and average-cut fancies. Off-make, poorly-cut fancies illiquid and very hard to sell, even at very deep discounts.

Global Comments

United States:
New York trading is slow but stable with many dealers still on their summer vacations. There are buyers looking for goods as polished prices continue to soften. There is steady demand for 1-carat to 3-carat, G-J, SI-I1 diamonds, while triple EX goods continue to sell at a premium. Retail sentiment is mixed as general sales were below expectations in June, while jewelry store sales fell in May, according to the latest data. Jewelers are optimistic about the second half of the year but are delaying their inventory purchases as diamond prices continue to slide. 

Belgium: Sentiment is weak in Antwerp as trading volume remains low. Dealers are avoiding making inventory purchases ahead of the vacation period in late July. Suppliers are holding large inventories of lower-quality goods, while there are shortages in select categories. Dealers are shifting from selling 0.30-ct to 0.40 ct. dossiers to parcels. There is steady demand for 1-carat to 2-carat, G-J, VS-SI diamonds, while demand is cautious for diamonds larger than 3 carats. Rough trading is slow as prices were kept stable at this week’s De Beers sight.

Hong Kong: Polished trading is stable. Dealers are relatively active but cautious about global market conditions. China’s 7 percent second-quarter economic growth beat expectations but dealers are still concerned about consumer sentiment. Jewelry sales in the city remain well below last year’s levels as high-income tourists from Mainland China skip Hong Kong for other destinations to do their luxury shopping. There is steady demand for triple EX diamonds.

India: Polished trading is weak as polished prices continued to soften. Steady U.S. demand is supporting the market, while Far East demand is cautious. Diamantaires are demanding cash payment from Chinese buyers following reports of delayed payments. Demand remains weak for 0.30-carat to 0.49-carat dossiers, while there is steady demand for 0.70-carat to 0.90-carat, D-H, VVS-VS2 diamonds and for 1-carat, D-H, VVS-VS diamonds. There is steady activity in the fancy shape market with good demand for ovals and pears and improving demand for cushion and pear shapes. Rough trading is slow as rough prices were stable at the De Beers sight. Polished production remains at reduced capacity as profitability remains a deep concern for manufacturers.

Israel:
Polished trading is slow but stable in Ramat Gan. Local activity was lifted slightly by a one-day trading fair on the bourse. Other initiatives in the works to increase activity in the prevailing weak market. Steady U.S. demand continues to support the trade. There is stable demand for 1-carat diamonds, with shortages developing in specific categories. In fancy shapes, there is steady demand for ovals and pears and improving demand for cushion shapes.
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