The global diamond industry has entered a slow period as specialty jewelry retailers go on vacation. Although a cyclical occurrence, this year traders are expressing deep concern over the levels of demands. Pressure on polished diamond prices are mounting. One trader summed up the situation: “what we probably need is a different business approach,” he said. All metrics say he is right.
The US wholesale market went dormant in July, as shop owners left for their summer vacations, getting a chance to relax and recharge before the pick-up in business in August. Although stores are working under the charge of store managers, they are not making diamond buying decisions at this time. With store owners away, wholesalers took advantage of the opportunity and also left for annual summer vacations. Coinciding with vacation time, the Diamond Dealers Club of New York, the main US diamond bourse, closed as it is moving to a new location.
The biggest news in the US retail market is the shakeup in the top management of Signet. CEO Mark Light is the last in a string of executives who have departed. He joins Executive Vice President and Chief Merchandising Officer Stuart Lee, and Senior Vice President of Signet Direct Diamond Sourcing Clark McEwen. Independent board member Virginia Drosos is replacing Light as CEO.
Tiffany has appointed Alessandro Bogliolo as CEO. Formerly CEO of Diesel and COO at Sephora USA, Bogliolo’s most relevant background is probably as COO and Executive Vice President of Jewelry, Watches & Accessories at Bulgari.
With so little activity in the US market, there are no real outstanding changes in demand or in the prices of polished diamonds. The one exception is the continued interest in SI clarity round-shaped diamonds. Most everything else is flat.
India went through two major changes in recent months: the demonetization last November, and the recent introduction of GST, a new unified tax code that intends to simplify India’s taxation system. The hope was that more than six months after the demonetization shock, the country’s economy would stabilize, and demands would improve across the board. After the introduction of GST, and the discovery that taxation of the diamond industry was not going to skyrocket, the expectation was that business could move forward.
As it stands now, both hopes did not materialize. India’s consumer market did not improve much after the demonetization, and the diamond wholesale market did not improve after the introduction of GST. Currently, with a rise in inventory, a delicate consumer market, US jewelry store owners away, and an overabundance of rough diamonds, the Indian market is, in as one trader put it, “not good at all.” Trading activity in the Indian diamond market is slow, polished diamond prices are under pressure, and overall demand is largely flat, with a return to declining demands in certain areas.
For rounds, IF-VVS clarity goods in D-I colors, 0.18-0.99 carats. This decline extends to VS goods in sizes up to 0.49 carats.
The small ray of light is an improvement in demand for 0.49-carat SI goods, rounds, and for certain GHI color, 2 carat and VS clarity goods in the 0.40-0.49 carat range in fancy shapes.
In late June, following the Hong Kong jewelry trade fair, the Hong Kong polished diamond market improved after an extended period of very slow activity. This improved business environment lasted until mid-July, and then the market slowed down again. It is not unusual for this market to see a decline in activity during the summer months, making it more of a cyclical occurrence. Although a slow time for wholesalers, retailers hold their promotional sales during July and August to boost consumer activity during this quiet period.
The market saw decent demand for round-shaped, 0.30-0.80 carat, D-I color, VS-SI goods. Most everything else was slow yet steady. Among fancy shapes, demand for 3-carats oval and emerald shape, DEF colors, VS-SI goods improved during July. In addition, demand was noted for small emerald-shaped goods from 0.10 to 0.50 carats in D-G colors, VS clarity.
The Israeli diamond trading center suffered from a drop in wholesale sales during July. Traders are reporting strong resistance from East Asian and US retailers. While US retailers can be persuaded at times with favorable payment conditions and credit lines, Asian retailers won’t bow. Buying polished diamonds is not easy either. Israeli traders are reporting that Indian suppliers are not budging on the price of polished diamonds, because of the higher price of rough diamonds. The question asked in Israel is how long the Indians will hold out before giving in to the new, lower prices needed to move goods.
The sales are suffering from a combination of American storeowners away on vacation, and an erosion in retail profitability. The one thing that all in Israel can agree on is that clearly their market is shrinking.
As a natural outcome, we are seeing a decline in demands in the Israeli market to the point that there are hardly any requests. Wherever there is demand, it is highly selective. There are a few exceptions. 0.15-0.18 carat white SI rounds are in high demand. 0.30-0.49 carat white SI rounds are in good and steady demand. There is also very strong demand for rare items such as pink, blue, and green color diamonds. There is steady demand for fancy yellow diamonds from the US.
There is a clear drop in demand for 0.70-0.99 carat rounds. Lower color rounds, as Israeli traders noted, are “suffering from a crisis.”
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