A sharp drop in demand was reported in May, as the diamond market slowed down due to increasing supply, and buyers waiting to see the outcome of the Las Vegas trade shows next week.
Trade in the US slowed down after the fast-paced activity seen in April. And it did not simply slow down a bit. With few exceptions, demand for polished diamonds was almost stagnant in the US, according to local traders. There are a number of reasons for this. First, the rush of activity in April filled the gaps in retailer’s inventories ahead of Mother’s Day.
Next, the rise in demand led to increased polished diamond prices. As noted in the past, the decline in prices was driven by consumers. Once prices were low enough, demand picked up. As prices rose, demand quieted, proving once again that the US consumer is very price sensitive. A third reason for the slowdown in demand are the upcoming trade shows in Las Vegas. The shows, mainly JCK, which will take place in the first week of June. The shows are on retailers and traders’ minds, all wondering what the show will bring, leading to what is often called in the industry, a wait-and-see. People are waiting to see what will transpire at the show before deciding what to offer consumers.
One area of activity is in fancy shapes. Top make, triple excellent ovals, in mid-range color and clarity, weighing 3 to 5-carats are in demand, as are half-carat and 0.70-0.89-carat I clarity ovals and pear shapes. It seems that the smaller fancy shapes are in demand by larger retail chains, while the large ovals are for higher-end independent specialty jewelry retailers.
In rounds, we are seeing a drop in demand for 0.07 carats and smaller goods, and a rise in demand for 3- and 4-carat rounds in typical American colors. Most everything else is in stable demand. Retailers are seeking 1-carat round goods, in good make, G color, SI-I1 clarity, on memo (consignment), but are having a hard time getting them, mainly because traders would rather keep them in stock until the Las Vegas shows and then sell them.
The diamond market in Mumbai, India is holding firm on polished diamond prices. A combination of elements is contributing to this trend, and all relate to rough diamonds. First, there is a feeling in the Indian market that there is a shortage of rough diamonds. In addition, manufacturers feel that demand for polished diamonds is good enough for them to keep manufacturing diamonds, and so, demand for more rough diamonds is ongoing. Finally, the higher cost of rough diamonds is leading manufacturers to keep polished prices up to maintain their profitability.
Polished diamond buyers travelling to Mumbai to purchase goods are faced with this firm stand on polished diamond prices. If they need to buy goods, they are rather reluctantly forced to adjust to these prices. If the purchase requirements are for goods in short supply, and much of the demand today is for goods with limited availability, they will be forced to buy at higher prices.
All this may give the impression of strong demand in the Indian diamond center, however, that is not the case. Overall, demand in the market is lower that it was in April. At this point, some traders are concerned about rough diamond supply, stating that if it increases, it will definitely put pressure on polished diamond prices.
In the latter part of the month, traders were mainly focused on the upcoming trade shows in Las Vegas, collecting goods, scheduling appointments, and hoping for a strong show.
The diamond market in Israel was quiet most of May, much like other leading diamond markets. The Israeli market was characterized by a shortage in goods, and difficulty bridging the gap between the cost of goods and the prices buyers are willing to pay.
Israeli traders travelling to India to buy polished diamonds are facing firm prices, and the cost is often as high as the price they can get on the sell, leaving them with no profit. With buyers unwilling to pay even a little more, the Israeli traders are finding it near impossible to close deals, in effect sending their clients to Mumbai to buy, losing out altogether. Sadly, this is the story of the Israeli market today. Close to no manufacturing of run-of-the-mill goods, forcing traders to be middlemen for other centers, with limited added value. In today’s market, Indian traders prefer selling to Israelis at higher prices only, possibly to drive them out of the business.
Demand was largely unchanged in May from April. Thirds (0.30-0.39-carats) are still in good demand, specifically collection colors and VS-SI clarities. Round 0.10-0.14-carats also continue to do well. All rounds weighing 0.01-carats and smaller are in good demand. Steady demand for one-carat rounds across the board, except VVS clarity.In the cape color range, steady demand against a shortage of 1-5 carat goods. A very quiet market for yellow goods.
In the secondary rough diamond market in Israel, prices are stable, however availability of goods has decreased, and purchases are limited. Supply of rough diamonds from Angola has declined recently.
As in all other global diamond markets, the diamond market in Hong Kong was slow in May. Traders that saw an uptick in demand from China are now focused on the upcoming trade show in Las Vegas. According to local traders, “lots of goods were shipped out” for these trade shows, mainly JCK, taking place at Mandalay Bay. At the same time, expectations from the show seem to be low.
The quiet diamond market in Hong Kong was not without its occasional bursts of demand. One item that was doing especially well was round-shaped, 1-carat, I-J colors, VS clarity goods, which were “very hot,” according to local traders. This sounds like a specific order for a jewelry manufacturer looking to fulfill a large order. The sudden leap in demand for this item pushed up the price to 25% below the list price.
Also in somewhat better demand were rounds, 0.50-carats and 0.80-carat size ranges, in GHIJ colors and VS clarities. Rounds weighing 1 carat, 3 carat, and 5 carat in GHIJ colors, VS clarities. There was a noticeable slowdown in demand for fancy shape goods.
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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