Trading levels in the global diamond market in April were decent, with rising demand for smaller goods, particularly 0.30-0.39 carat rounds, and ongoing shortages in many categories. The mood of most was optimistic, because of the good trading environment in the main consumer markets, although a good number of traders are finding it difficult to adjust to the changes in trading conditions.
The US retail market is busy, which is infusing local polished diamond wholesalers with optimism. This is especially true among the big majority of well-established dealers. The first four months of the year were a very good stretch following a number of difficult years that were characterized by a tough trading environment. The year started strong following the good November-December holiday demand from consumers, continued with what they (as opposed to diamond traders from most other diamond trading center) view as a good Hong Kong trade show in March, and most recently the improved demands from retailers.
Business is picking up, in particular for rounds, the traditional preference of American consumers, followed by oval-shaped diamonds, and marquee goods, for which a few years ago there was almost no demand at all.
Retailers are busy selling traditional 1-3 carat round solitaires, which are typical diamonds for engagement rings. Other shapes that are in demand for larger sizes are 2-4 carat ovals and marquees. There is some demand for 7-8 carat diamonds in fancy shapes, in excellent makes. These items are in limited availability in the US market and therefore not offered to retailers on memo.
Demand for round diamonds is in typical American ranges – G-J colors and VS-I1 clarities. Fancy-shaped diamonds, mainly in very good makes or better, are seeing across-the-board growth in demand. Interest in any fancy-shaped diamonds that are less than very good makes seems to be of no interest among consumers.
Demand in the Indian diamond market was stable in April. From the perspective of traders, this is negative, and many are worried about an impeding slow down. Bank financing is an ongoing issue in the Indian diamond center, although the issues vary by company. Larger, established firms report that banks have not reduced their financing. Mid-size and smaller companies say that financing is lower, more expensive. For all firms, financing is more difficult to come by. The overall concern is that in time, banks will be firmer and that the worst of the Nirav Modi scandal has yet to hit them. Time will tell if that is true.
Availability of many goods seems to be in decline, yet according to traders, prices of polished diamonds are still holding up. Lower quality goods, mainly I clarity, in larger sizes, are doing well, as are dossier goods. The reason is a shortage of them. Another item in rising demand is top color and clarity half-carat goods. Demand for square-shaped diamonds and fancy-shapes is largely flat.
In the fiscal year that ended March 31, 2018, India’s total gross exports of gems and jewelry amounted to $41 billion, down 5.1% compared to the preceding fiscal year. Polished diamond exports totaled $23.7 billion, up 4.2%. Imports of rough diamonds shot up 10.6% to $18.9 billion. GJEPC chairman Pramod Agrawal said during the announcement of the annual figures that they intend to add 3 million people to the Indian diamond industry’s workforce by 2022.
The Israeli diamond center was active in April, and although many were busy, many others are complaining about a drop in business and an utter lack in activity. The difference between the two groups is mainly in their marketing. Firms that are actively pursuing clients and building relationships with them are doing better than those that have not done so.
There are a number of outcomes to this situation. One is consolidation. Recently Israel-based Leo Schachter Diamonds announced that Mumbai-based Rosy Blue had bought a minority stake in the company. Consolidation is not a common practice in the diamond industry’s midstream. Companies tend to grow organically, and at times will cooperate with other rising companies with like-minded approaches. At times, a large company will invest in a smaller firm that shows great potential or that is synergetic. The Rosy Blue-Leo Schachter situation is an unusual move, because they are both large companies.
Another outcome is that of fleeing money. Diamond traders in Israel are taking more and more of their money out of the business and investing it in other areas, such as real estate. This is not just a divestment strategy, but a hedging strategy at best, and an exit plan at worst. A vote of low confidence in the future of their diamond trading business and its chances of profitability. Be that as it may, this is money that is not expected to return to the diamond industry anytime soon – if at all.
There is a general shortage of goods felt in the Israeli market, a continued issue in the past few months. Good demand has been seen for dossiers in nearly every category, except three quarters (0.70-0.89-carats). Traders are pointing out an anomaly created by current demand – prices of half carats are high and those of three quarters are low.
There are noted good demands for VS-SI rounds in the 0.08-0.14-carat weight range, as well as for the 0.15-0.17-carat weight range. There is good demand for VS-SI rounds in all colors starting from thirds (0.30-0.39-carats), and stretching all the way to half carats (0.50-0.69-carats). One-carat rounds are in good demand for white goods.
Large firms that are manufacturers of the Forevermark program are reporting demand for Forevermark diamonds from wholesalers not in the program. Among traders there was active trading in lager goods, weighing 10 carats or more. The market for fancy yellow diamonds is quiet.
Diamond traders in the Hong Kong market are complaining of slow trading activity. That said, the range of demand widened a bit in April. Polished diamond demand was noted for rounds, 0.30-0.39 carats, a global trend, in particular for G color, VS-SI clarity goods. There was also demand for the same type of goods in the half-carat size range. In larger goods, there was demand for top items – round, 2-3 carat in D-E colors, SI clarities, triple excellent makes and no fluorescence.
Other notable demand included marquise and pear shapes in 0.30-0.89 carats, D-G colors, SI clarities. Ovals and square shapes, specifically princess and emeralds, are moving slowly.
While matters seem somewhat gloomy in Hong Kong, in Mainland China the market remains good. Retailers are seeing an upward trend in consumer demand, and traders are busy supplying loose diamonds to stores and jewelry manufacturers. Good demand is noted for rounds, in G-H colors and VS-SI clarities for 0.30-0.39 carats and half carats.
Unlike most other markets, there is demand in China for smaller size emerald-shaped diamonds, mainly 0.10-0.49 carats, D-G colors and VS clarities. Traders have also reported good demand for smaller size marquee and pear-shapes, sizes 0.15 to 0.40 D-G colors, VS clarities.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.
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