As 2015 Comes to an end, diamantaire Ehud Laniado sums up the year and discusses the main issues of relevance for the diamond trade, including transparency, financing, marketing, synthetic stones and pricing. He states that, "Financing and cash flow are among the most important issues we will have to address in the coming year. This goes far beyond transparency.
From polishedprices Weekly Market Report: Traders reported some last minute orders in the run up to Christmas in the main US market. In Asia, all hopes are on the next big sales season during the Chinese New Year next month. In the wider market, traders said tight supplies in certain areas was driving up prices.“Polished is reacting to shortages in certain items,” said one trader. “These are moving with higher prices, but are well made goods only,” he said. In lower quality polished, inventory levels remain high.
At least 200 workers were rendered jobless after a diamond unit owner was forced to close his factory due to the financial crisis and weak market conditions. This is the first incident of a diamond unit closing down post-Diwali vacation. Pre-Diwali, around 350 small diamond units had shut down in Surat rendering over 20,000 workers jobless. The closure of Sai Impex, owned by Mahesh Thesiya at Swaminarayan Nagar at Varacha, has rendered 200 diamond workers jobless. Industry sources said around 15% of the diamond units in the city have yet to reopen, even as Diwali vacation is over.
Rob Bates of JCK takes an insightful look into the troubles that have plagued the diamond industry in the second half of 2015, and analyses the internal bickering that has resulted. Only a short time ago, De Beers was the crown jewel in the tarnished Anglo American crown, but now, at the end of 2015, the bottom has fallen out of the diamond business. De Beers’ second-half sales will likely come in at $1.2 billion–$1.3 billion, a 30-year low.
Oleg Petrov will start in the new position as of today (November 16). The USO is the ALROSA division responsible for sorting, valuation, pre-sale preparation and sale of diamonds. Petrov joined ALROSA in September as adviser to the company’s president. Before that, he was sales and marketing director at PJSC Uralkali, responsible for sales and exports from the Russian Federation, and logistics and financing.
The scuttlebutt surrounding De Beers' multi-tiered pricing mechanism and sweetheart deals for select sightholders at its October sight is nearly certain to shake up the rough diamond market and may potentially ignite a price war, writes Chaim Even-Zohar in his latest Diamond Intelligence Briefing, even though he acknowledges that this would be "self-defeating".
Rio Tinto will cut back its production of diamonds this year and focus on bringing more affordable jewellery to the Chinese market as ample supply and waning demand for the precious gemstones weigh on prices, writes Financial Review. The miner announced on Friday it would "pause final product processing in the fourth quarter at Argyle in light of current market conditions" and now expects to produce 18 million carats this year, down from its previous estimate of 20 million.
Recapping an alltogether difficult and unusual year, the coming holiday season will be an important yardstick to determine where the diamond industry is heading, Rapaport analyst Avi Krawitz says. The stable but modest growth in the US market, turmoil on the stock markets and the continued pressure on the Chinese market - expectations for China's Golden Week sales results are low - don't call for optimism.
In his latest blog, industry analyst Edahn Golan, considering the upward trend in US Jewelry retail sales with August the 4th consecutive month of record sales, calls for cautious optimism for the global diamond industry. Cautious, because the increased sales aren't felt by the midstream just yet, as large inventories, falling stock markets and turmoil on the commodities market still loom, probably for some time to come, Golan says. Furthermore, Golan believes the renewed consumer interest could be explained by the price consumers are paying for jewelry.
"Today, the lack of generic promotion, and the threat of undisclosed synthetics getting into the mainstream market are issues parallel to the magnitude of blood diamonds; however, at the moment there is a complete lack of collective leadership in tackling both these issues. Unfortunately, unlike the proactive action taken to tackle the issue of blood diamonds to nip it in the bud before it could really damage the industry, I believe on the current two issues, the industry has fallen behind the curve."
Russell Mehta, Managing Director of Rosy Blue India Pvt. Ltd
Leading diamond and jewelry industry figures took part in a debate on the challenges facing the business on September 3 at the Eastern Economic Forum meeting in Vladivostok. The panel session, called New Development Drivers of Global Diamond Business in Asia Pacific, looked at the current state and future prospects of the diamond industry and was hosted by Russian diamond miner Alrosa.
Israel Diamond Exchange (IDE) President Shmuel Schnitzer says that the global diamond industry must continuously think of creative solutions to the tough market conditions. Old ways of thinking will not help the trade overcome current difficulties, said Schnitzer.
Hertz Hasenfeld is CEO of the family owned Hasenfeld-Stein, a New York-based polished diamond manufacturer and supplier. The company is known in particular for supplying diamonds to high-end, independent jewelers in the North American and Greater China markets.
Lab-grown diamonds versus naturally mined stones, issues concerning diamond grading reports, marketing to Millennials, using social media to increase sales, improving profitability, and identifying the latest jewelry fashion trends are among the panel discussions to be held at Jewelers of America New York summer show on July 26 and 27.
Dubai’s diamond market has been hit by a global downturn, with prices falling by as much as 25.8% in the past year, according to the RapNet Diamond Index (RAPI). The price of 1-carat laboratory-graded diamonds has declined 15.3% since July last year, including 0.9% in June, according to the index. Diamonds of 0.3-carat have fallen the most, losing 10.6% so far this year and 25.8% in the past 12 months. The popular stone has been trading at “steep discounts”, RAPI said, contributing the loss to “relatively quiet” demand in the US and “cautious” demand in the Far East.
The world's first exchange for physically-backed diamonds is slated to begin trading in September this year. The Singapore Diamond Investment Exchange, as it is known, aims to create a new marketplace for the global diamond trade. It is expected to further boost the Republic's position as a commodities trading hub. The platform will turn what has largely been a manually-driven diamond trade into an electronic one.
In thinking over the cross-currents pummeling our business these days, I realize that we are but one cork bobbing around in heavy seas. True, we have issues that are peculiar to the business, but global economic, technological and political upheavals are also making it very difficult to get clarity on where we might be heading. Still, some developments warrant a close look, even if the effects will not be fully felt for a few years.
Industry analyst Ehud Arye Laniado offers a compelling argument for strict regulation, certification and re-naming of lab-grown diamonds. It may seem odd to protect the natural diamond pipeline when man-made stones are environmentally cleaner, raise none of the socio-political issues of operating mines in developing countries and will make “diamonds” affordable to a larger public, but Laniado argues that it is a necessary step to protect the value of natural diamonds.
Ichiro Uchihara, CEO of Uchihara Group, a Japanese jewelry wholesaler and retailer catering to high-end consumers, spoke with Rapaport News about the company’s strategy and efforts to expand its brand equity in Japan, Asia and internationally. A few key quotes:
India's polished diamond exports fell 9.3% year on year to $1.742 billion in May, according to provisional data collected by the Gem & Jewellery Export Promotion Council. Exports declined 53.3% by volume to 2.591 million carats. During the first five months of the calendar year, India's natural polished diamond exports increased 6.5% year on year to $9.218 billion.
For more than a century, diamonds have been a supply-driven industry. That model doesn’t work any more and the global diamond industry is now seriously hurting. (...) All these issues were brought up by speaker after speaker at the 2015 WFDB and IDMA Presidents' Meeting in Tel Aviv. Yet for all that, no one seems to have come up with a strong initiative to start wooing customers again. Everyone at the meeting seems to be content having reviewed the progress of the initiative known as the World Diamond Mark. This is actually a quality assurance and consumer confidence initiative.
Industry analyst Edahn Golan addresses the challenges facing the jewelry retail sector: from online jeweler Blue Nile's low-profit-margin marketing disrupting the retail sector to low price expectations, stagnant inventory and cluttered display cases. He sees a potential solution: "I call it the H&M model: they offer products that are highly designed of passable quality at a very affordable cost. [They] offer something that is great for the coming year.
Rapaport reports U.S. polished diamond imports contracted 11.8 percent year on year to $1.793 billion in April. However, polished exports plunged 24.5 percent to $1.213 billion.
After significant volatility during the third and fourth quarters of 2014 and early 2015, global polished diamond prices in May slipped, after climbing modestly higher in March and April. The IDEX Index of Global Polished Diamond Prices averaged 128.7 during May, down from April’s average of 131.1. The good news: May prices were well ahead of the year’s low of 123.7 in February. The IDEX Index is sales-weighted, so it reflects current market activity. Polished diamond prices were less volatile in May than in prior months.
Times have changed. Remember when a retail jeweler was the first and only stop when purchasing a diamond? Today, the traditional retailer competes with more than just other jewelry stores for the diamond sale. It seems that everyone is now in the diamond business, from big box stores to department stores to countless Internet sites. Add to this challenge shrinking margins and the increasing number of shoppers willing to make a big purchase online and it makes a bricks-and-mortar jewelry store owner almost want to hang it up.
In this week's IDEX memo, Ken Gassman argues that jewelers have lost pricing credibility and the archaic pricing marketing strategies the industry applies are having an adverse effect on consumer behavior. In these conditions, Gassman says, clamoring for higher prices for diamonds - as the industry is doing today - will only make things worse. Gassman concludes that even though the jewelry market is unlikely to disappear, an adapted marketing strategy that focuses on the needs of today's consumers is the only way to kickstart the market again.
Vinod Kuriyan, Chief Editor & Market Analyst at GemKonnect, takes a look at the future of diamond manufacturers, which he says looks less and less viable as a standalone business. Over the past years, more and more jewellery manufacturers and retailers have become long-term clients of the industry's main rough producers. Kuriyan argues that the optimistic projections of miners, saying scarcity would inevitably drive up prices haven't played out, while current retail prices leave little room for sizeable price mark-up through the pipeline.
PolishedPrices reports polished trading activity in the dealer market improved. Traders said prices in some areas of polished had stabilised, supported by shortages - mainly in higher qualities. Factory output in India is expected to stay low till the end of the month, when the holiday season there ends. The main focus is on the all important trade show in Las Vegas (May 29 – June 1). Meanwhile, the main polishedprices index ended the week virtually unchanged, opening at 131.10 on Friday, from 130.83 at the opening on Monday.
In an interview with Rapaport's Avi Krawitz, Judy Meana, heading the recently inaugurated Panama Diamond Exchange (PDE) as Vice President, sheds more light on the ambitions of the PDE to develop Panama as the pivotal point for the South American diamond and jewelry rough, manufacturing and retail market. Meana believes the region offers great potential with a market of over 600 million consumers, characterized by a fast growing middle class with "an appetite for luxury and brand-name goods".
In an in-depth opinion piece on Rough & Polished, Nyurgun Timofeev, Chairman of the Diamond Council of Yakutia, argues that today Russia is not maximizing the potential of local diamond manufacturing, contrasting heavily with competitors who the author believes are constantly improving technology, pushing innovation and creating a stimulating business environment.
Bluedax reports De Beers decreased its prices between 3-5 percent on a wide range of boxes at its latest Sight. Some traders complained, however, that along with prices, the company also downgraded its assortment, making the real price reduction smaller than the miner claimed and causing some to feel even more dissatisfied. In general, as concerns about marginal profit in manufacturing persist, the overall mood in the market continues to be depressed.
On his blog, Ehud Laniado weighs the situation on the market following last week's first De Beers' sight.
Polished diamond trading improving as steady U.S. demand raises expectations for Las Vegas Shows. Far East demand soft despite improved China jewelry sales during May Day holiday. Polished prices stabilizing with shortages of good quality X3 diamonds. April 1ct. RAPI +0.4%. Fancy shapes weak. Rough markets cautious. De Beers reduces prices about 3% at small May sight, but rough still highly unprofitable. Titan's FY revenue +9% to $1.8B, profit +11% to $127M. U.S. March polished imports +9% to $2.2B, polished exports -8% to $1.7B.
JCK's Rob Bates sizes up the mood of the diamond and jewelry industry and puts forward six key developments that are causing a general feeling of softness and a lack of confidence that things can or will move forward any time soon. He points to disappointing sales despite the economic revival (in the US), industry consolidation in the (US) retail market, the millennials conundrum, a downward trend in metal prices, a lack of generic promotion and unanticipated slow markets accross the globe. But there is still hope, says Bates.
Martin Rapaport (Rapaport Group) released a comprehensive editorial entitled “Market Correction” that calls on the diamond trade to end unsustainable business practices, pointing at internal rather than external challenges as the main cause for the current state of affairs in the diamond industry. Citing the imbalance between high rough and low polished diamond prices, Rapaport calls on the banks, explicitly referring to the Indian government and banking sector, to stop financing unprofitable diamond manufacturing until polished prices rebound and profitability returns.
Industry analyst Edahn Golan previews the first De Beers Sight of the 2015-2018 Global Sightholder Sales (GSS) contracts, starting Monday 4, taking place on the backdrop of perhaps the most challenging period for the global diamond industry across the entire pipeline; jewelry sales keep declining, as do the profit margins of mid-stream traders and manufacturers whose cash-flow levels remain a difficulty, while producers are reporting a drop in sales and have announced reduced production.
While most discussions on synthetic diamonds are about identification and disclosure, Paul Zimnisky, industry analyst, believes the main question should be what the future of the synthetic diamond industry looks like in terms of market share. He concludes that currently, due to the cost prohibive nature of the technology, gem quality synthetics represent only 1-2% of the global diamond market, mainly driven by environmentally and ethically conscious consumers and millenials that are attracted by the 'futurology' appeal of the product.
The significant weakening of rupee against dollar in the past one week has made rough diamonds costlier by 2-3 per cent, raising concerns among the Indian diamond trade that cuts and polishes 80 per cent of the world's rough diamonds.
Diamond traders are worried that a price hike will dampen the solitaire demand in Indian market that was gradually picking up in the country and had clocked a 7-8 per cent growth in FY15.
Ehud Arye Laniado takes an insighful look at the state of the industry only a month ahead of JCK Las Vegas and notes that, "2015 already appears to be a year of fighting for survival and capital preservation ... it seems that the industry is only looking forward to 2016." The most significant trend is that despite dwindling demand for higher price point diamonds and manufacturers declining large amounts of rough and reducing polishing, miners have lowered production rather than prices, demonstrating their confidence in the future.
The overall polishedprices index once again peaked at a 2015 high, similar to the previous week. The main index opened 1.2% up from the prior week on Monday at 137.4 points. The overall index is currently 6.8% lower than this time last year, and has gained 0.7% since the start of 2015. The best performance came from 1.0 carat Commercial diamonds, which finished 5.1% higher than the prior week; Fine and Commercial 0.3 carat diamonds fell 3.3% and 1.5% respectively below the prior week.