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Buy Polished Instead of Rough to Stop Destabilizing the Market

Mar 26, 2015 6:00 PM  
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Warning: De Beers $700M March sight destabilizing the market as it severely reduces liquidity and increases supply, while polished demand slumps due to weak currencies, Chinese crackdown and lower oil prices. Sightholders over-buying rough to ensure future supply ahead of April 1 new De Beers contract. Trade is advised to buy polished instead of rough and stop adding fuel to the fire. Basel shows slow. ALROSA 2014 revenue +23% to $3B, loss of $284M. Signet 4Q comps +4%, sales +46% to $2.3B, profit +30% to $228M. Tiffany 4Q sales -1% to $1.3B, profit of $196M vs. $104M loss. Antwerp diamond police chief found with confiscated diamonds, arrested on money laundering charges.

Fancies: Ovals and Pears doing well, Cushions and Emeralds stable, Princess and Hearts weak. Prices for curve-shapes improving slightly. Straight-shape fancies not hot. Prices for fine-cut stones are holding up better than rounds. Pears OK. Princess relatively weak. U.S. demand supporting market for commercial-quality fancies, especially for goods under the carat. Larger sizes stable. Far East fancy demand weak. Buyers are very selective and insisting on excellent-shape proportions. Significant price differentials between excellent- and average-cut fancies. Off-make, poorly-cut fancies illiquid and very hard to sell, even at very deep discounts.


Global Comments


United States: Trading is slow in New York. Dealers expect polished prices might recover toward the end of the second quarter as they sell off old inventory. There are very few new goods coming to the market as manufacturing has declined. However, there are some shortages reported in certain categories of polished. The turnaround time for grading at the Gemological Institute of America (GIA) has decreased to two weeks, reflecting a reduction in polished supply. U.S. demand is supporting the global market but dealers are concerned about soft prices in the manufacturing centers. Retail demand is stable but seasonally quiet. Bridal remains relatively strong and there is good wholesale demand for SI1-I2 clarity diamonds.

Belgium: Sentiment improved as demand from the Far East, Middle East and U.S. markets picked up. European demand remains cautious as reflected by light traffic at the Basel shows. Demand is order-specific with little inventory restocking taking place. There is good demand for 1-carat to 2-carat, J-M, VVS-SI diamonds. There has also been an improvement in demand for very large stones above 10 carats, despite relatively tight liquidity in the market. There is good demand for fancy shapes, except for princess and cushion cuts. Pear and emerald shapes are especially hot. Rough trading on the secondary market is slow with a notable increase in supply following this week’s De Beers sight.

Hong Kong: The market is slow with little improvement in activity since the March show. Demand is order-specific with little inventory restocking despite retailers reporting strong gem-set jewelry sales in Mainland China during the Chinese New Year Spring Festival. Many diamantaires believe that the local wholesale market is oversaturated and report that some players are struggling to compete. There is good demand for above 3-carat, K-M, VS2-SI, triple EX diamonds. Recent monetary easing by the People’s Bank of China is expected to raise liquidity and keep Chinese consumer demand steady in the months ahead.

India: Trading is slow in Mumbai as caution prevails. Local diamantaires reported slow European demand at the Basel shows while Far East demand also remains soft. U.S. demand is stable. Liquidity is tight as it tends to be toward the end of the Indian financial year on March 31. There is good demand for non-laboratory-graded, 0.20-carat to 1-carat diamonds and steady demand for GIA-graded, 0.90-carat to 3-carat, G-K, SI-I1 diamonds. There is good overall demand for fancy shapes. Older inventory is being absorbed by the market as polished manufacturing levels remain low. The turnaround time for grading at GIA India has been reduced to about 15 days, reflecting lower production levels. Rough trading is slow following this week’s De Beers sight with a lot of goods coming to the market.

Israel: Trading is slow with weak European, Far East and U.S. demand reported in the past week. Dealers are hoping for a spurt of trading in the coming week before many take vacation over the 8-day Passover holiday that begins on April 2. However, most are expecting demand to remain cautious as it has been at the recent trade shows, and they expect that the market will only improve around mid-year. A larger volume of rough is making its way onto the secondary market but local manufacturers still prefer to buy polished.
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Warning: De Beers $700M March sight destabilizing the market as it severely reduces liquidity and increases supply, while polished demand slumps due to weak currencies, Chinese crackdown and lower oil prices. Sightholders over-buying rough to ensure future supply ahead of April 1 new De Beers contract. Trade is advised to buy polished instead of rough and stop adding fuel to the fire. Basel shows slow. ALROSA 2014 revenue +23% to $3B, loss of $284M....



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