In his latest blog, industry analyst Edahn Golan isn't sugarcoating the message, the diamond industry is suffering as the pandemic is exacerbating the long-term downward trend of polished wholesale prices as well as the steep decline in jewelry share of wallet.
The Antwerp World Diamond Centre continues its AWDC Webinar Series this week Friday, April 24 from 12:30-14:00 with a presentation on the "Polished Market: a Q&A with Edahn Golan."
In this webinar, AWDC is having a chat with industry expert Edahn Golan on the current state of the market, what we have learned from previous crises concerning how to manage our business when we are in the midst of one, and advice on how to prepare to reboot your company after COVID-19 has subsided. Mr. Golan will be discussing questions such as
Industry analyst Edahn Golan takes an in-depth look at the industry performance of the first quarter of 2020 which, needless to say, is dominated by the impact of the Corona virus pandemic. In his extensive analysis Golan discusses polished diamond price evolution, the state of the midstream in all major trading hubs, banking and evolutions upstream and regarding LGD (Lab Grown Diamonds).
Golan identifies a number of key take-aways for Q1:
In his most recent post, industry analyst Edahn Golan takes a look at history and points to a series of disastrous events in the past decades and, more importantly, how despite the fact all of them had major effects on the diamond industry in the short-term, in the long run, the industry managed to recover and even grow.
Just about wherever one looks in the diamond industry - natural or synthetic - demand is not keeping up with supply, or is out of balance, writes Edahn Golan on his Diamond Research & Data site.
A quick comparison of retail prices show a price difference [between LGDs & naturals] of 20-40%, depending on the specific goods and the retailers’ branding, market positioning, etc. Wholesale prices behave very differently. In the wholesale market diamonds are priced as a commodity ... a much more accurate way of measuring price changes over time. Polished wholesale prices of LGDs are 50-85% lower than those of natural diamonds ... the smaller the goods, the larger the price difference. On average, 1-ct.
“We are not planning to change our strategy, integrate in the new market (synthetic product market) and launch our own synthetic production, or sell lab-grown diamonds. It is obvious that ALROSA as a diamond producer and one of the founders of Diamond Producers Association (DPA) hopes that this initiative will lead to differentiation of diamonds and synthetic stones, underlining the status of synthetics as a distinct low-price product.
I’m not here to throw mud at the Diamond Producers Association or its efforts. What they do is great and very much needed. However, I do want to suggest that we need to go beyond general promotion. The augmenting campaigns, those that create a specific desire followed by a specific action, is the kind of marketing we are missing today.
- Edahn Golan highlights need for diamond marketing, wonders if DPA getting consumers into stores.
In his latest blog post, "A Market in Chaos", diamond industry researcher and analyst Edahn Golan examines the disconnect between the rising trend of lower price point/smaller-diamond jewelry and the willingness of manufacturers to pay more for the rough to produce it. He starts with trends in the consumer jewelry market - because this is the ultimate determining factor for the diamond market - that are demonstrating a distinct shift towards lower value goods. Drawing on his impressions from the JCK Las Vegas show, Golan writes, "The trend of smaller diamonds stood out.
Speaking at the Antwerp World Diamond Centre (AWDC) Café - a monthly guest lecture series at AWDC - diamond industry analyst Edahn Golan addressed the latest trends in the U.S. retail jewelry market. Drawing on actual point-of-sale data gathered by NPD Group from thousands of retail doors in the U.S., including major jewelry chains and hundreds of independent jewelers, Golan notes that the industries tracked by NPD in the U.S.
Diamond industry analyst Edahn Golan breaks down the rough diamond valuation system that was one of the key topics this year in Kimberley Process (KP) discussions. The heart of the issue is whether a method can be hashed out so that rough diamond producers receive a "reasonable" (read 'fair') price for their rough diamond parcels on the international market. The solution suggested is that rough diamonds would be valuated by converting the transaction prices retailers and jewelry makers pay for polished diamonds into rough prices, minus the manufacturers' costs and margins.
Diamond industry analyst Edahn Golan takes a close look at US consumers' polished diamond purchasing trends based on data that retail metrics research firm NPD collected from nearly 4,000 specialty jewelry retailers. Golan says that, "One of the biggest issues in the diamond industry, especially in the manufacturing sector, is a lack of impartial and detailed data about consumer purchasing habits.
Industry analyst Edahn Golan provides a rundown on last weekend's JCK show in Las Vegas, touching on traffic in the jewelry and diamond areas, the Diamond Producers Association's (DPA) marketing campaign, the hot topic of synthetic diamonds and ALROSA's strong presence in the desert. Particularly the high-end jewelers reported positive results, though much of the time the area was distinctly quiet.
Diamond industry analyst Edahn Golan draws back the veil of rhetoric concerning synthetic and natural diamonds to reveal what has been missing from the debate thus far: hard numbers.
Against the lavish backdrop of Baselworld, "the glittery industry fair, where the latest innovations in timekeeping are unveiled and gem-encrusted baubles from the likes of Chanel, Chopard, Patek Philippe and Graff tempt buyers from around the world," Kati Chitrakorn writes for Business of Fashion that all is not well in the diamond industry backstage. "Acute pressure has been mounting on the industry’s $80 billion diamond market.
Industry analyst Edahn Golan says fine jewelry retail sales in the US in 2015 posted a modest 1.1% rise, in the November-December holiday season, sales increased 2.5% YoY. The increase is good news, says Golan, but he adds the industry should remain cautious, "we are not out of the woods yet".
The rise in overall fine jewelry sales in the US and the demand for smaller goods indicate that the US market was interested in jewelry this holiday season, but not in the higher-end costlier items. This is underscored by Tiffany’s 5% drop in same store sales during Nov-Dec. At Signet, its mid-priced Kay posted a 7.2% increase in same store sales, while at its higher-end Jared, same store sales were up only 2.7%. After a very difficult year, we are looking at some positive movement, focused however on smaller, lower-cost items.
Diamond industry analyst Edahn Golan takes a cold hard look at the diamond industry in 2015, citing the well known issue of inventory buildup throughout the pipeline, but emphasizing the miners' slow response - and only then after their hands were forced by sightholder refusals and even contempt. He writes, "[De Beers] started taking steps and initiatives in earnest only in the second half of the year. We could argue that 2015 was the year of carrying 2014 mistakes. Producers ignored the high inventories and continued to pump rough into the market.
According to industry analyst Edahn Golan, De Beers' sightholders want and need to see a 10-20% rough price reduction, without which the goods will remain uneconomical to purchase. Two factors have led sightholders to expect that De Beers will do just that. The first is De Beers' decision to (reportedly) sell a large amount of rough to certain sightholders outside the last sight at a discounted price. This shows that De Beers is fully aware that their prices are too high.
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.
Industry analyst Edahn Golan on whether the diamond market is grinding to a halt, Rio Tinto's withdrawal from Zimbabwe, continued manufacturing woes and a ray of sunshine with increased U.S. jewelry sales. One key indicator to watch is De Beers' next Sight. Sightholders are deferring up to 25% of purchases until the August Sight, and DB has already lowered its sales estimate for July, citing 'shortages'. Golan wonders if these shortages are really a way to cut supply a little without saying so outright, and suggests that all eyes should be focused on a potential showdown in August.
Industry analyst Edahn Golan ponders the plight of De Beers' sightholders against the following background: One-carat, HIJ/VS and FDH/VS1-SI1 round polished diamonds are mainstays of the diamond consumer market. Since June 2014, their price declined by more than 20%. However, prices of the rough boxes required to produce them - the Commercial 2.5-4 ct box and the Fine 2.5-4 ct box - were reduced only by 11%. The wider this gap grows, the more difficult it is for sightholders to squeeze out a margin by cost-cutting and marketing. So why do they keep coming back for more?
Industry specialist Edahn Golan looks at economic indicators to find the roots of $550mil in lost jewelry sales ($816mil lost for specialty jewelers). The cause of declining sales is certainly not to be found in rising prices, as the prices of jewelry, diamonds and gold have all fallen since 2011. His conclusion: "The decline in sales is not necessarily an issue of high prices or a bad price reputation; after all, diamonds and diamond jewelry are luxury items, not a necessity. The half-a- billion dollars in lost sales is a figure significant enough not to be dismissed as a phase.
Edahn Golan asks: what is the average wholesale price per carat of polished diamonds? He breaks down the calculation taking into consideration the world’s global production of diamonds (130,482,194.53 carats), percentage of gem-quality diamonds out of total mined production (+/- 55%), polishing yield by manufacturers – the average weight of a polished diamond compared to the rough diamond it was polished from (40% on average), and finally the total value of polished diamonds churned out by the global industry ($21.6 billion).
In his latest blog, Edahn Golan argues that despite the positive news on price reductions at the latest May sight, those reductions are not sufficient, not just because sightholders complain the reductions aren't going far enough. Golan believes a combination of moderate price reduction and supply decrease would work much better not only for manufacturers but also for retailers. He adds that the latest sight results demonstrate that De Beers will not decrease supply if it can help it, and the next Sight is expected to be a big one.
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.
Edahn Golan takes an in-depth look at the diamond industry and argues the industry at large, from mining to jewelry retailing, is demand driven, while demand is currently weak. Golan believes mining needs to scale down supply and manufacturing needs to adjust to real consumer demand; designs must inspire, and marketing has to return in a large way. Without rethinking the model, popular interest in diamonds may keep shrinking.
Industry analyst Edahn Golan takes a comprehensive look at the industry's rough market. Golan calculates that at the end of Q1, De Beers is stuck with a quarter of the rough diamonds that were offered to but refused by Sightholders, equaling half-a-billion dollars, putting the company's choice to maximize in question. At the same time, the gap between rough prices and polished prices is widening, and some believe that high rough pricing may be a covert strategy to consolidate the industry.