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Market update - Diamond trade hit by slowdown

It’s never a good sign when ‘slow’ becomes a buzzword. But the past few weeks in the global diamond trade have been undeniably slow – ranging from the business to business trade of polished diamonds, to orders from retailers, overall consumer demand and even the pace at which manufacturers are transforming rough diamonds into polished stones.

Many pinned their hopes on a boost around Valentine’s Day, especially in the US. It’s still too early to say whether Valentine’s was a success or failure this year for diamond jewellery, but market surveys from Georgetown Institute for Consumer Research, The Statistic Brain Research Institute and The National Retail Federation all found that the percentage of consumers who were planning to buy jewellery for Valentine’s Day was down.

Still, retailers went all out to push sales via online and print advertising, creative window displays and in some cases discounted prices, around this holiday which has traditionally been linked with a hike in diamond jewellery sales. 

Meanwhile, polished trading in New York has been slow but with pockets of good demand, according to traders. Some buyers have been travelling to India and Israel in search of lower prices and a way to balance their expensive surplus inventories. In Antwerp the mood has been weak as a conflict mounts between suppliers holding prices firm and buyers’ pushing for greater discounts.

Last week’s International Diamond Week trade show at the Israel Diamond Exchange succeeded in attracting customers from India, Turkey, the US and Asia - mostly from China and Korea, who came looking for better prices. While the mood was fairly upbeat on the first two days, ultimately only a limited number of transactions took place.

In Asia, Hong Kong logged an increase in orders before the Chinese New Year and the subsequent Golden Week, according to local traders. Bangkok has lately proved to be the most active retail market in Asia, whilst Indonesia and Malaysia have been suffering from a slowdown due to a weakening of the local currency and a crackdown of governmental trade regulations. Indian diamond traders are reporting that polished trading is slow, although international buyers, especially from the US and Israel are currently in India seeking bargain prices. 

Overall, transactions in both polished and rough diamonds are limited, according to all diamond market segments and reports.

We are also seeing a steady demand for rough diamonds in the melee sizes, yielding mainly 10-20 per carat polished diamonds as well as for 2.5 to 4 carat rough diamonds, yielding mainly 1 carat to 1.5 carat polished diamonds. The main driver of demand for these stones is the need to fill the gap between last month’s reduced supplies from primary sources and required volumes for manufacturing.

Manufacturers and rough diamond traders are now largely adopting a wait-and-see attitude for the next round of diamond sales from primary sources. If future sales turn out to be at the same volumes and prices as last month, manufacturers say they will continue to participate in tenders and purchase in the secondary market. In the meantime, manufacturing at reduced volumes may help clear up the industry pipeline. The financing required to achieve this will probably rely on industry self-financing as we reported last week because banks are reluctant to finance purchases in the secondary market, according to many of their clients. Many manufacturers are saying the market will not be able to absorb large volumes of rough diamonds, even at lowered prices. If primary rough sources sell a large volume of rough diamonds at lower prices it might heavily impact the value of inventories and secondary rough market prices, causing losses to those holding large inventory. 

The diamond industry has most definitely seen better times. Let us wait and see how market forces now play out. 

 

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 advisor. Nothing on this website can be construed or constitutes an offer or a recommendation to sell or to purchase diamonds or the solicitation of an offer to purchase any diamonds nor does it constitute an offer or a recommendation to sell or to purchase any security or financial product or the solicitation of an offer to purchase any security or financial product.

 

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