Market update - In hope of liquidity and leadership

The diamond market is quieter than hoped-for at the moment. Sales of polished diamonds in the run-up to Thanksgiving in the US proved disappointing and this has led to a decline in polished prices. 

Diamond manufacturers, especially those in India, have lowered asking prices to boost sales and replenish cash. As a result, some traders have been finding prices for polished diamonds in India surprisingly low.

The diamond industry is facing a dilemma right now. Diamond manufacturers hold a large inventory of polished diamonds which they are having difficulty selling and which is preventing them from buying new rough diamonds.

But if prices were to drop to ease the problem, this would lower the price of polished diamonds and the value of the inventory held by manufacturers. If on the other hand, the prices of rough diamonds continue to remain constant, many diamond manufacturers won’t be able to purchase them, because of their liquidity issues, which in turn would prevent them from benefiting from future profits.

In similar situations in the past, large players would buy significant amounts of rough diamonds in order to inject the necessary liquidity into the market. Sadly in today’s market, such leadership is lacking.

I believe the industry now needs to act with caution. Any major decrease in prices, either of rough or polished diamonds, will result in a decrease in the price of inventories. The industry has overcome such situations in the past but it remains to be seen whether it can withstand the pressure with no leadership and a lack of liquidity.

Overview of demand in the market this week:

10 carat rough diamonds, yielding 4 carats and larger as polished diamonds – going strong

5 to 10 carats, yielding 1 to 3 carats as polished diamonds – weak demand, but diamonds requiring preparation before polishing (known as speculative diamonds) are in demand

2.5 to 4 carats, yielding 0.75 to 1 carat as polished diamonds and yellow and brown rough diamonds – weak

2 carats, yielding 0.5 to 0.75 carat as polished diamonds and complicated stones under $100 per carat – good demand especially for imperfect stones

4, 5 and 6 grainers (1, 1.25 and 1.50 carats rough yielding mainly 0.20-0.30 carats and up to 0.50 carat in terms of polished diamonds) – in demand

Melees (small size rough of between a 1/4 and 1/2 carat, yielding 0.07 and 0.2 carats as polished diamonds) – in demand

Smalls – weak except for -6 industry sieve (Yielding 0.005 to 0.03 carats in terms of polished diamonds) which are very strong

All low rough diamonds with yellow and brown colours – weak demand

Cleavage (complicated stones requiring preparation before polishing) under 100 USD per carat – in demand

DISCLAIMER

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.