Searching for a means to safeguard smooth transactions in the event it ends up having US sanctions imposed on it, Russia's Alrosa, the world’s largest producer of rough diamonds, has found a partner in its efforts to conduct trade in a currency other than the US dollar. Evgeny Agureev, Alrosa’s director of sales, told the South China Morning Post that it has enlisted one of its many Chinese customers - Chow Sang Sang Jewellery - on a long-term contract this year.
Riding the current wave of depressed rough diamond sales throughout the industry in recent months, De Beers' ninth sale of 2018 earned (provisionally) $440 million, the miner's lowest earnings in a sales cycle since October 2017. Soft demand from India has been the predominant factor in the decline of rough sales - particularly of smaller goods - across the industry.
Carats.io, an Israeli blockchain startup in partnership with the Israel Diamond Exchange, has raised $1.6 million in its first funding round led by Net Capital Ventures, an Israeli venture capital fund, the organization stated in a press release. Carats.io says it is issuing the first digital coin backed by diamonds. The coin, CARAT, which is 100% redeemable for diamonds is currently in presale. The company reports that they are registering large subscriptions for the token through the company website.
Russia's ALROSA, the world's largest diamond producer, saw its profits tumble by 41% in FY 2017 owing to a variety of factors, including: a 13% ruble appreciation against the US dollar, a 9% decrease in the average price of gem-quality diamonds sold and fallout from the tragic Mir mine flood. The financial downturn took place against the background of increases in the volume of diamonds sold as well as production.
Russian diamond mining giant ALROSA announced that its revenue in H1 2017 fell by 17% in current value terms to $2.66 billion (RUB 155.6B), while net profit tumbled by 46% to $840M (RUB 48.9B).
As anticipated, while Petra Diamonds achieved record levels of production and sales in FY 2017, with production up 8% to 4.0 Mcts (FY 2016: 3.7 Mcts) and revenue up 11% to US$477.0 million (FY 2016: US$430.9 million), investors remain worried as the company missed its production and revenue guidance by 8-9% due to the slower than anticipated build-up of its expansion programs across its operations. Furthermore, the company pushed back its production guidance and unveiled higher than expected spending and debt, causing its share price to tumble.
Russia's ALROSA has announced that it has gained direct access to trading at Moscow Exchange’s FX Market, and that the first trades were executed on April 4, 2017. As of January 16, 2017, Russia starting permitting select non-financial institutions to participate in the FX market directly on equal terms with banks and brokerage firms. So ALROSA, a non-financial institution, can now directly access the foreign exchange market and trade forex without the use of an outside broker.*
Bain & Company together with the Antwerp World Diamond Centre (AWDC) has published their sixth annual report on the global diamond jewelry trade, with the lead insight being that in 2015 - not a banner year by any stretch of the imagination - retail sales grew 3% at constant exchange rates but declined about 2% in US dollar terms due to currency depreciation and slower demand in China. This followed a period of growth from 2012 through 2014, signifying that diamond jewelry consumption has entered "a moderation phase".
The weakening of the yuan against the Hong Kong dollar is making life even more difficult for the city’s retailers, with brands forced to raise prices of local goods for mainland visitors to offset the yuan's fall amid an already weak tourism industry, writes the South China Morning Post.
Martin Rapaport has released a statement claiming that due to the EU not being a major diamond consumer in recent years, with demand expected to fall even further as a result of potential currency and equity downturns in the EU and Great Britain, the impact of the Brexit will be that, "Global investment demand for higher quality diamonds as a store of value will increase due to global economic and political uncertainty." He does not anticipate that Chinese or Indian diamond demand will be impacted in a negative way. Furthermore, "The important U.S.
"As April 2016 concludes, the diamond industry has without question improved relative to a year ago, however, current industry data and commentary paints a mixed picture as to whether market fundamentals have in fact stabilized enough to support a new wave of sustainable growth continuing into the near-to-medium-term", writes Paul Zimnisky, author of the Zimnisky Global Rough Diamond Price Index to introduce his in-depth analysis of global diamond trade demand, supply and pricing in 2016.
David Brummer writes for Idex Online that the Chinese New Year - the Year of the Monkey - "comes at a bit of a crossroads as far as retail is concerned, both in mainland China and on the island city of Hong Kong." Hong Kong retail sales suffered their worst annual decline last year since 2002, battered by a fall in big spending tourists from the mainland and weak consumer spending.
Russia, the world's largest producer of diamonds in both volume and financial terms, saw its currency's historic fall continue for a second day, with Bloomberg saying speculators moved after comments by the head of Russia's central bank that it didn’t intend to intervene in the market to stop the slide. The ruble declined as much as 5.3 percent to almost 86 to the dollar, heading for its biggest two-day drop in a year.
In an unusual step, Zimbabwe says that it will make the Chinese yuan legal tender in the country after Beijing agreed to cancel $40 million in debts. Finance Minister Patrick Chinamasa said the move comes as Zimbabwe seeks to increase trade with Beijing, and usage of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe." China is Zimbabwe’s biggest trading partner following Zimbabwe’s isolation by former western trading partners due to Harare’s human rights record.
The International Monetary Fund (IMF) is adding China's yuan to its benchmark currency basket in a step that the Beijing government has long lobbied for to provide recognition of its global economic power. The yuan, also known as the renminbi, joins the dollar, euro, pound sterling and yen in the Special Drawing Rights (SDR) basket alongside. To meet the IMF’s criteria, Beijing undertook a program of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours.
Tiffany & Co reported a surprise drop in quarterly sales and forecast a bigger fall in full-year profit than it had expected earlier as a strong dollar hurt tourist spending in the United States and reduced the value of sales from other markets. The company, which has raised prices to offset the impact of a strong dollar, said worldwide comparable sales fell 5% in the third quarter ended Oct. 31. On a constant-currency basis, comparable sales rose 1%. The dollar rose about 12.5% against a basket of major currencies in the year ended Oct.
According to Bain & Company's 2015 "Luxury Goods Worldwide Market Study", the overall luxury industry surpassed €1 trillion in retail sales value in 2015. Meanwhile, aided by global currency fluctuations and continued jet-setting of "borderless consumers," the personal luxury goods market, including jewelry, ballooned to €253 billion. This represents 13% growth at current exchange rates, while real growth slowed significantly to 1-2%.
The global market for personal luxury goods is heading for its weakest year since 2009 as a combination of stock market turmoil, a strong dollar and a commodity-price rout curb demand. According to consulting firm Bain & Co., luxury goods sales will rise as little as 1% to 253 billion euros ($280 billion) in 2015. Jewelry, however, is expected to be the exception to this trend. Bloomberg writes that, "Bain expects jewelry to be 2015’s best-performing category, rising 6%, contrasting with a slump in watch sales caused by weakness in Asia.
The supervisory board of Alrosa has approved the possibility of settlements in rubles on new export contracts, the Russian diamond mining giant said in a statement. However, the price of diamonds will still be calculated according to the Central Bank's exchange rate based on market prices denominated in U.S. dollars. The format of settlements with current clients will not change and ruble payments for rough diamonds will not be possible before 2018. "This refers to giving buyers the option to settle up in rubles if they express such a desire.
The surging Swiss franc and weakness in a number of key markets - particularly Asia, where demand has faltered in China and Japan, and collapsed in Hong Kong - is taking its toll on Swiss watchmakers. Other markets have also proved difficult: a stumbling rouble has hit Russian demand, and sales in the UAE, an increasingly important market, have declined.
Evert P. Botha writes in Jewellery Business Magazine that Canada's currency woes - the loonie has depreciated over 20% against the U.S. dollar since July 2014, nearing an 11-year low - and the effective banishment of European Gemological Laboratory (EGL) International as a result of overgrading practices has led to "a new kind of normal" regarding diamond prices in Canada.
At the end of last year, China became the world’s second largest diamond consuming market. More Chinese people not only buy diamonds as a luxury, but also hold them as an investment. In the international market, the price of white diamonds has increased around 160% in the past ten years. But in China, prices of some diamonds in retail stores have remained almost unchanged compared to a decade ago.
On Tuesday gold added to recent gains above the psychologically important $1,100 an ounce level after China's currency move surprised markets. Futures contracts in New York with December delivery dates were exchanging hands for $1,108.10 an ounce in after hours trade on Tuesday after ending the regular session up $3.60 at $1,107.70, a three week high. Shares of mining companies and industrial metal prices fell sharply in response as the devaluation makes commodities priced in USD more expensive and could dampen demand from China even further.
Britain's benchmark share index fell on Tuesday, hit by stock price falls for mining companies and luxury firm Burberry after China devalued the yuan, raising the costs of imports. China devalued the yuan after a run of poor economic data. Burberry was the top faller in early trading, losing 2.2%. "A weaker yuan makes imports more expensive and with China accounting for some 14% of the company's sales, the implication is clear," said analyst Tony Cross. Mining groups BHP Billiton, Glencore, Antofagasta and Rio Tinto were down 1.5 to 2.1%.
China has devalued its currency to boost flagging exports in a move that risks deepening the global currency war. After recent data showing falling exports and a stalling manufacturing sector, the People’s Bank of China (PBOC) said that it was allowing the yuan to weaken by nearly 2% in the hope of making China’s exports cheaper and pushing down borrowing costs. In what it called a “one-off depreciation”, the PBOC said the centre of the yuan’s trading band was reset 1.9% lower at 6.2298 per US$, its weakest point against the US$ for almost three years.
When will the yuan rival the dollar? Many in China think it only a matter of time (15-20 years). Outside China, opinions are more divided. Some think the yuan is already on the verge of displacing the dollar in Asia; others predict it will never get there. China’s leaders talk of the yuan’s internationalisation in peaceful terms. A more diverse monetary system will breed financial stability for the world, they say. But China’s rise poses a serious threat to America.
While many have been rushing to write off the euro, given the sovereign debt problems affecting several members of the eurozone in recent years and the ongoing turmoil regarding Greece, a leading analyst, Peter Schiff, points out that the single currency has survived for 16 years despite claims on many occasions that it would sink.
China will be launching the China International Payment System (CIPS) as early as September or October this year. The CIPS system would allow hassle-free transactions, enabling foreign companies to conduct financial transactions with Chinese companies directly. CIPS could have a positive impact on China's international transactions and will place the yuan on an equal position with other world currencies in terms of risk reduction, operating hours and maximizing liquidity.
ALROSA predicts that its profits will decline 2.6 times (RUB 21.8 billion) in 2014 to RUB 13.7 billion versus 2013, mainly due to the weakening of the ruble
“This move symbolizes the surrender of economic growth for the sake of preserving the financial system.”
The Russian central bank has announced it will raise its key interest rate to 17 percent from 10.5 percent, effective today. The news has prompted the ruble’s biggest rate rise since 1998.