A slowdown in trade in most diamond centers is having an impact on prices of many items. The market is suffering from an oversupply of small goods that is having an effect on financing, rough diamond purchases and, of course, prices as the market is heading to Diwali.
The slowdown in trade in the US polished diamond wholesale market continued in October, as the local retail market is starting to gear up for the holiday season. Although the holidays are supposed to spur demand, over the past decade the rise in retailer demand for polished diamonds increases in November. With limited retailer demand, demand from wholesalers is cyclically slow.
Due to an increase in inventories in India, smaller goods are offered at relatively low prices by Indian traders, in particular lower qualities and colors. The impression other traders have from this is that many Indian dealers are under pressure for cash and looking to liquidate some old stocks. Considering the oversupply, it will be very difficult.
This issue extends up to half-carats and larger. All the way up to 4-carats, demand for lower color and clarity rounds has declined.
As far as fancy-shaped goods go, the issue remains with the make – the quality of the polishing. Perfect makes are in demand, good makes may sell, but there are no buyers for poor makes and low qualities.
Another issue in the US market is bank credit and the cost of bank credit. Access to money is a challenge, and it seems that only a handful of large dealers are able to survive rising interest rates.
The Indian diamond market was slow during October, the effect of the slowing US and Chinese wholesale markets, dragging down the rest of the midstream. The largest drop was in smaller goods, resulting in a drastic drop in prices. Local traders state that the growing availability of lab-grown diamonds, especially CVD, and the weak rupee exchange rate against the US dollar are contributing to the decline.
Prices of larger goods are propped up by the limited supply of these goods against “good enough” demand.
The important Diwali holiday is approaching, and in the past, when the diamond market was weak, it mainly took the form of an extended vacation period, preceded by a rise in diamond manufacturing. The logic was that this would allow factories to send workers on their vacations with extra money in their pockets. This year, things are a little different, with polishing activity relatively slow.
The reason for this slowdown is understood to be due to limited cash, and the weak rupee. The rise in inventory and limited demand is therefore leading manufacturers to be cautious. That both explains the drop in rough diamond purchases as well as indicates that the Indian diamond sector is not very upbeat about the holiday season.
There was a certain pick-up in activity in the Israeli diamond market after the August-September slowdown. That said, the volume of business is not large. Strong demand was noted for triple excellent F-I color, VS-SI clarity rounds. This demand is taking place against shortages of these items. There is also strong demand for rounds in VG makes, however transaction prices are reflecting deep discounts. Buyers are still avoiding goods with florescence, but when goods with florescence are sold, it is at a discount.
A decline in demand for cape colors and fancy yellows continues. Among fancy shapes, ovals remain the item in highest demand, while pear shapes are experiencing lower demand.
Unlike most other diamond centers, in Hong Kong business is stable, with demand for the Christmas season fueling activities, bucking, or perhaps preceding, global wholesale activity.
Chow Tai Fook reported that during the last quarter, ending September 30, same-store-sales in Mainland China were up by 6%, and sales in Hong Kong were up 23%, both fantastic results. Total retail sales in Mainland China increased 15% and in Hong Kong were up 25%. That said, the rise in sales was attributed to demand for gold jewelry. Sales of gem-set jewelry declined 2% in Hong Kong, and in Mainland China increased by only 1%.
Chow Sang Sang reported a 23% rise in retail sales and a 22% rise in same-store-sales in Hong Kong and Macau. Unlike Chow Tai Fook, here the contribution of gem-set jewelry was significant, up 33%. The company credited improved tourist traffic, which is something that should benefit all jewelry retailers.
As in all other markets, in Hong Kong too prices of round smalls (stars and melee) suffer from a drop in demand that led to a price decline of some 3-5%. On the other hand, the price of 0.30-carat certified goods remains stable, bucking global trend.
Demand for round 0.30-0.80-carat EFG colors, VS-SI clarities remains stable. Demand for fancy-shaped goods was slow during the month: cushions and pears were in low demand in all sizes. There is some interest in princess, marquees, hearts as well as emerald-shaped goods in 2, 3, and 5-carat, EFG colors, VS clarities. Demand is low for fancy-shaped goods smaller than 1-carat.
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.
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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.