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Market Sentiment Weak, Liquidity Tightens for Manufacturers

Aug 28, 2014 6:00 PM  
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Market sentiment weak with liquidity difficulties for manufacturers as banks tighten credit. Polished suppliers offer greater discounts to generate cash as rough and polished inventory levels remain high. Low expectations in India for Hong Kong show but Hong Kong dealers hoping show will increase sales of large diamonds. De Beers Aug. sight est. at $715M. Registration opens for 2015 De Beers sightholder contract with focus on financial compliance. ALROSA to start client contract negotiations in Sept. Signet 2Q revenue +39% to $1.2B, profit -14% to $58M. Tiffany 2Q revenue +7% to $993M, profit +16% to $124M. Chow Sang Sang 1H revenue -34% to $1.2B, profit -15% to $67M.

Fancies: Fancy shape market steady with fair demand for excellent shaped and larger polished sizes. Cutters are moving to fancy shapes because of significantly high rough prices for identical-quality round diamonds. Curves (Pears, Ovals) are doing better than Squares (Emerald, Princess) in larger sizes with squares doing better in under the carat sizes. Demand for Princess cut weak. Far East markets becoming more aware of fancy shapes. Buyers very selective regarding shape- and cut-quality with extreme price differentials between excellent- and average-cut fancies. Off-make, poorly-cut fancies illiquid and hard to sell even at very deep discounts.
Global Comments:


United States: Polished trading activity in New York is stable, albeit slightly quieter than previous weeks. Sentiment is fairly positive as consumer confidence and retail sales have improved in the past weeks. Jewelry retailers report steady bridal sales. At the wholesale level, there is steady demand for the bread-and-butter 0.30-carat to 1.25-carat, G-H, VS-SI certified diamonds and improving demand for larger goods in fine makes. However, overall buying remains cautious and retail jewelers are not yet buying to build up inventory for the season. There is also steady demand for fancy shapes with ovals and cushions being the strongest seller.

Belgium: Polished trading in Antwerp remains slow and sentiment is weaker than expected after the summer break. Dealers are concerned about liquidity challenges in India and reduced bank credit to the industry as a whole. There is good demand for 0.20-carat to 0.70-carat, D-I, VS-SI diamonds. Dealers are looking for goods but the market is price sensitive and dealers are cautious to buy before the Hong Kong Jewellery and Gem Fair that begins on September 15. Demand for fancy shapes is steady.

Hong Kong: Activity has improved as foreign dealers from Israel and Belgium are back from their summer vacations. The market is focused on preparing for the Hong Kong show. Some buyers are holding back from purchasing as they feel they can get better prices at the show. There is steady demand for large, SI-clarity goods while demand for VVS-VS large diamonds is relatively weak.

India: Polished trading remains relatively weak as liquidity is tight among diamond manufacturers. There is a lot of inventory in the market, particularly goods below 1-carat, and prices are softening as a result. Dealers prefer not to have their goods graded when possible due to the expense and long turnaround time, and as they can garner better margins on non-lab-graded stones. There is a sense that prices have been reduced in Mumbai compared with other centers due to the current liquidity constraints in the Indian market. Suppliers are offering deeper discounts for cash deals. There have been few foreign buyers in the market but they are expected to return in the coming weeks before the Hong Kong show. Domestic demand has improved due to the ongoing wedding and festive season. Rough trading has slowed since the August De Beers sight and boxes are selling at low premiums, and at discounts in some cases, due to tight liquidity.

Israel: The market is still slow as dealers are returning from the two-week summer vacation. Activity is focused on preparing for the Hong Kong show, especially after the International Diamond Week, scheduled for September 1, was postponed. There is trading going on but suppliers are concerned that they will not be able to compete with the lower prices being offered in India. 
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Market sentiment weak with liquidity difficulties for manufacturers as banks tighten credit. Polished suppliers offer greater discounts to generate cash as rough and polished inventory levels remain high. Low expectations in India for Hong Kong show but Hong Kong dealers hoping show will increase sales of large diamonds. De Beers Aug. sight est. at $715M. Registration opens for 2015 De Beers sightholder contract with focus on financial compliance. ALROSA...



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