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Market Comments 5/10/2012

May 10, 2012 6:00 PM  
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TRADE ALERT: Indian Reserve Bank orders all foreign currency holders to ‎convert 50% of their balances to rupee in reckless attempt to control plunging rupee. ‎Recent irresponsible government actions include retroactive taxation and penalties, ‎import taxes on gold and diamonds and on/off excise taxes. Out of control Indian ‎government now posing serious threat to diamond market liquidity. Petra Diamonds 3Q ‎revenue +87% to $98M, production +126% to 622,509 cts. Blue Nile 1Q revenue +4% to ‎‎$83M, net income -94% to $154K. U.S. 1Q polished imports -7% to $4.8B. Hong Kong’s ‎‎1Q polished imports +9% to $4.3B. Belgium’s April polished exports -7% to $943M, rough ‎imports +20% to $1B.‎

Global Markets

United States:
There is mixed sentiment in the wholesale market as trading has slowed ‎slightly in the past few weeks. Still, trading is taking place with many overseas buyers ‎looking for goods. Wholesalers who stocked up on inventory during the past few months ‎are in better shape than companies who need to source goods currently as scarcities are ‎prevalent. While retailers are engaged in Mother’s Day promotions, bridal continues to ‎dominate sales.    ‎

Belgium: Trading has been relatively quiet with political and economic uncertainty in ‎Europe influencing the mood among buyers. There is demand for goods, particularly for ‎‎1.00-carat and 1.50-carat, commercial quality diamonds. Suppliers have noted a ‎shortage of SI clarity stones. Rough trading is cautious following last week’s Diamond ‎Trading Company (DTC) sight as manufacturing profit margins remain tight. ‎

Polished trading is restrained due to the ongoing summer vacation and continued ‎volatility in the rupee-dollar exchange rate. Domestic buyers continue to experience tight ‎liquidity, while very few overseas buyers are seen in the market. Overall demand is ‎weak, particularly for lower piqué goods. The local gems and jewelry industry is relieved ‎with the government’s cancellation of the excise duty on jewelry, but consumer demand ‎is not expected to pick up significantly in May since it is generally not a busy month for ‎weddings. Local rough trading continues to be weak. There is sufficient rough supply but ‎manufacturing levels continue at levels below capacity. Select trading is observed in ‎rough goods which yields polished of I color and lower.‎

Israel: Polished trading continues to be affected by the money laundering investigations ‎that allegedly took place in the bourse during the past three months. Dealers are cautious ‎about who they do business with. Still, there is activity and good demand for 1.00-carat, ‎‎1.50-carat and 2.00-carat stones with G-H color and VS-SI clarity. Some have noted that ‎it is not easy to fill requests due to shortages in the market. Dealers are focused on ‎preparing for the JCK Las Vegas show hoping that steady U.S. demand will boost trading ‎in the second half of the year. ‎

The wholesale market is stable but dealers remain cautious mainly due to the ‎weakened economic outlook. There has been some slowdown in activity since the May ‎Day weekend as many trading partners in India are on vacation and many retail buyers ‎still have inventory remaining from the holiday. Buyers are increasingly price sensitive. ‎There is steady demand for 1.00-carat, G-H, SI1 certified polished diamonds.   ‎

Hong Kong:
Wholesale trading has slowed in the past month due to a weaker outlook for ‎the Chinese economy. Suppliers are trying to push prices higher but they are meeting ‎resistance from buyers, particularly on round diamonds. There is continued strong ‎demand for fancy shape stones and well cut fancy shapes sell relatively easily. Local ‎retail sales are also relatively slow.  ‎
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