Polished diamond prices were practically flat overall in September, according to the Mercury Diamond Global Tracker™ (MDGT™), an index of polished diamond transaction prices. The steady prices, which follow a months-long period of moderating price declines, are a positive sign of stability. Polished diamond prices have been continuously declining for the past three years.
Prices Are Declining Overall
The MDGT™ stood at 114.80 in September, a negligible decline from its 114.81 during August. Polished diamond prices have been steadily declining since July 2014, a 39-month stretch. On a year-over-year basis, prices have been declining for 34 months. The last time the index showed an upward year-over-year trend was in November 2014.
During the 39-month period of declining polished diamond prices, the MDGT™ index fell 19.3%, underscoring the ongoing weakness of the polished diamond market.
MDGT™ is based on the transaction prices of diamonds weighing 1-30 carats, collected and used for the Mercury Diamond™ Price List. It provides wholesale polished diamond prices based on transaction prices in the wholesale market, and is aimed at serving the wholesale market first and foremost.
In September, polished diamond prices declined by 2.7%. The year-over-year rate of decline during September continues a disconcerting trend of increasing rates of decline. This trend started in June, and prices have been declining at a faster rate every month since then, as the following graph shows. The rate of price declines since April moderated, and averaged just 0.5% on a monthly basis. Since June, the year-over-year rate of decline increased to 0.6%, and then to 0.8% in July, 1.7% in August, and a worrying 2.7% in September. This trend indicates an ongoing issue in the diamond industry, which will likely mean an increased need to generate better cash flow.
Based on our research, the easing in polished diamond price declines stems from a decline in inventory levels after an extended period of oversupply of goods, as jewelry manufacturers increased work ahead of the November-December holiday. This was coupled with better-than-expected demand at the Hong Kong trade fair during the month, especially from Asian clients. In addition, the Indian diamond sector is entering the Diwali holiday period, during which factories are closed while the country goes on vacation.
The polished price decline trend started in June 2014, and has been running continuously since then. Overall polished diamond prices peaked in July 2011, and declined until October of that year. They recovered, and then declined again for a number of months, until June 2014.
During the past two years, overall polished diamond prices increased only three times on a month-over-month basis, most recently during March. The month-over-month declines have become the norm in recent years, although price changes are more volatile on a month-over-month basis, which reflects seasonal changes neutralized in year-over-year comparisons.
Good Steady Demand for Thirds Prop Their Prices
The MDGT™ index is composed of the price performances of many different diamonds, of many different size ranges. During the past few months, the prices of most size ranges were down, except one – thirds. Round diamonds weighing 0.30-0.39 carats increased in price every single month from April 2017, with a single dip during July, when their prices fell 1.7% on a month-over-month basis. On average, prices of thirds increased 0.7% every month from April, and rose overall by 2.4% during the six-month period.
A number of other size ranges have also seen improving prices, including one carats, which rose by 1.0% month-over-month, 1.5-carats, and two carats. Prices of two carats have increased by a dramatic 2.4% compared to August. The price increases are backed by jewelry manufacturers working on the items that will be offered at stores during the November-December holiday season, driving demand from wholesalers. We saw this demand starting for thirds, and now for bigger goods.
On a year-over-year basis, every size range declined in price, most in the mid-single digits. The most notable price declines continue to be halves, three quarters, 1, 1.50, and 5 carats, whose year-over-year price decline is 5% or more. Halves and three quarters have lost more than 10% of their wholesale value compared to last year, underscoring the shift in consumer tastes to smaller goods.
The continued long-term weakness in polished diamond prices is an ongoing issue. The improved performance of several size ranges is good news, and the overall flat price performance is an indication that prices may have reached their bottom, although this is not certain. During September, rough diamond buyers sought to buy goods from mid-size and smaller diamond mines, as well as the secondary market, because of their lower prices. This is a positive indication that the diamond industry is responding to the changes in the market. In addition, a cyclical rise in demand in the coming months is expected, and hopefully the influx of cash, coupled with a lowering of polished diamond inventory, could potentially lead to a recovery in polished diamond prices, at least in the short term.
About MDGT™ and the Mercury Diamond™ Price List
We have developed a system that collects transaction prices from a wide range of manufacturers, traders and retailers. These many monthly transactions are augmented by constant research in the market, which backs, double checks, verifies and completes the transaction data. The system covers more than 18,000 polished diamond categories across the 4Cs, including polished diamonds weighing up to 30 carats with clarities ranging from Flawless to I3 in colors from D to P and in the various shapes.
The price list provides a price for a top stone without any irregularities. There is a separate table of irregularities, which provides the necessary discount or premium to find the exact current price of any particular diamond.
This polished diamond pricing system was reviewed and validated by one of the Big 4 accounting firms, and that firm continues to audit the price list monthly. The pricing system is in the process of obtaining a patent in the United States. Traders will not only find the current transaction price of each diamond; by applying their manufacturing costs, they can also “reverse engineer” to calculate the cost of rough diamonds.
Currently, we publish the price list monthly, on the tenth of every month. It is also available in the form of a ticker. Take a look at this important alternative, which has the potential to contribute to an important change in the market. Please download the list and test it. We provide it to you with the hope that you will consider using it regularly.
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.