After an extended period of steady yet relatively weak diamond trade in the wholesale market, which reflected a less-than-spectacular retail environment among jewelry retailers in the US, the annual diamond and jewelry trade fairs opened in Las Vegas last week: Couture, JCK, and Luxury.
Because of this business environment, as well as a change in the dates of JCK (which resulted in a fair held during the work week without a weekend) expectations among diamond traders were not high. The change in dates was important. Traditionally, JCK opens at the very end of May and includes a weekend. The weekend allows many retailers, mainly independents, to leave their stores and travel to Las Vegas for the show. While they are in town, they have an excuse to make an event out of it, mixing business with pleasure. Without the weekend, many retailers are hesitant to leave their stores behind. The result was far less foot traffic at the show. The show was therefore quieter, which raised concerns among exhibitors that demand would be low.
Perhaps it was the cautious approach, maybe a tighter choice of goods presented by exhibitors at the show, or possibly a change in retailers’ approach – be it as it may, by the end of the show many diamond exhibitors stated that the show was “alright”, if not outright “good”. As we reported last week, the volume of inventories declined for higher quality smaller goods, and increased for goods 3 carats and above, and flat for 6 carats and above. The decline in inventories apparently reflected shortages, as sales at the show were focused on these items.
The majority of transactions were for typical American goods – GHI colors and SI-I clarities, rounds and fancy shape. However, there was also demand for higher-end goods in DEF colors. Another area of demand was lower-cost large goods weighing 5-10 cts. The demand here was for SI clarity goods with average colors. Another area of very specific demand was for top 3-5 carat D/IF goods.
Despite the rise in demands from the US market, and the rise in demand at the show compared to last year, prices remain stable. The retail market is completely unwilling to pay more for their diamonds, and is steadfast about it. This is a demand-driven as opposed to a supply-driven market.
American retailers were not the only ones purchasing at the market. Their Chinese counterparts were there as well, which is an unusual sight at these US-based shows. Demand from the Chinese market was also somewhat surprising – they were willing to compromise on polished diamond makes, buying goods graded Very Good and Good. This is contrary to their previous insistence on Excellent makes. They were also willing to buy items with up to medium fluorescence, which is also uncharacteristic.
The lower foot traffic was not really an issue in the end, as those who attended were there to buy. Others who attend when the show includes a weekend are perhaps there more as an excuse to take the weekend off and see what is going on, and less to buy goods.
The two higher-end shows, Couture and Luxury, went well, which is usually the case. The first, held at the Wynn Hotel, was clearly a success, and exhibitors were happy with the results. This show is for higher-end retailers that specialize in higher price-point items, and cater to a higher income population that is more resilient to economic changes. This group is also more willing to buy diamonds. The Luxury show did well too, but here and there some exhibitors expressed less satisfaction compared to Couture. At both shows the focus was mainly on brands, with those at Luxury being a little less high-end.
According to the latest US government figures, jewelry sales rose 5.1% year-over-year in April, which could explain the rise in interest in diamonds. However, there was not such a large increase in demand for polished diamonds, indicating that the good news on diamond sales should be taken in the context of a small revival combined with a possible loss of market share to non-diamond jewelry.
While polished diamond prices maintained their stability with a slight decline, prices of rough diamonds are moderately rising. According to rough diamond traders, prices of several of De Beers’ assortments (boxes) at the June Sight were higher compared to the previous Sight. This was most notable for the cheaper rough diamond goods. One possible reason is the issues that diamond miners are facing in South Africa, where the Minister of Mines has denied De Beers a license to export diamonds. Much of De Beers’ South African production is lower-cost rough diamonds.
De Beers is taking the state to court, but there is an expectation that supply of these lower cost goods will be renewed soon.
Meanwhile, overall rough supply is plentiful, considering the current consumer demand levels. With few specific shortages, this is a consumer-driven market, and therefore the spot shortages are not resulting in large price increases – consumers simply move on to other jewelry items.
As stated in the past, to get out of the current rut we must improve marketing and education in the consumer market, which will increase understanding of the rarity of diamonds and help improve sales. At the same time, we should also consider adding a new track for buying diamonds, one that is based on logic and knowledge. Such a venue will create a market of wealth-preservation purchases of diamonds, one where the purchase is by well-informed buyers interested in buying diamonds as an asset. With such a double-pronged approach, we can turn around a ship that is heading in a less-than-favorable direction, and set a new course of growth.
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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