July 2018 Market Report: A Summer Slowdown

As diamond centers across the globe enter the summer slowdown, the market was characterized by limited activity and steady-to-declining demand. De Beers and ALROSA released their half year figures showing rising rough diamond prices and changes in production.

US

With the wedding season almost over, and the tourist season about to start, specialty jewelry retailers are adjusting their inventory and demand. Retailers preparing for the summer vacations and the tourist traffic that it brings stocked up on goods before suppliers go away on vacation, resulting in a small rise in the range of goods in demand. At the same time, a drop was evident in the variety of goods in declining demand.

According to traders, many dealers and store owners express interest in specific memo demands, “very spotty" as one trader described it.

It looks like the large retailers are trying to refocus on smaller size fancy-shapes, but only in very good makes. Conversely, we see that many Independents, specialty jewelers that have one to three stores, have a growing interest in carrying lower cost jewelry sets with nice-looking, small round diamonds. Some consider them as fashion jewelry although they are made of precious metals and set with precious stones. 

The demand for small size fancy shapes is focused on SI-I clarity goods in a range of colors, from 0.23-0.49-carats. In the half carats to one carats (0.50-1.49-carats) segment the demand expands to VS clarities. From one and a half carat and above, the demand is more specific, focused on VS-SI clarities, E-I colors.

One way for small American buyers to get better prices is through combined orders. This is done mainly with orders from Indian vendors.

India

With vacations approaching, polished diamond trading activity in Mumbai, the world’s largest polished diamond center, has slowed down. Accordingly, a very sharp rise was evident in the range of goods in declining demand, namely rounds, fancy-shaped goods and square-shaped diamonds.

Manufacturers are still working, although output level has declined, churning out only enough goods to keep prices at current levels. Their main issue is a shrinking supply of funding from local banks, a reaction to frauds and growing disillusion with the Indian diamond trade.

Traders are reporting specific demand for dossiers and ovals and triple excellent with no fluorescence goods. Otherwise, sharp declines in demand are evident for rounds, half-carats and larger. Demand is declining also in fancy-shaped diamonds in 0.40 pointers and up, mainly with top clarities. Finally, a drop in demand is seen for square-shaped goods, a category that suffers from limited demand even in the best of times.

Hong Kong 

The Hong Kong diamond market was quiet in July as the summer vacations were getting underway, with businesses slowing down and expected to slow down even further in August. In addition to the summer vacations, a weak Chinese yuan is impairing the demand from mainland buyers. Coupled with the US-China trade war, traders are reporting a small but noticeable effect on the diamond market. 

That said, as a region that is also an active consumer market, some specific demand were presented by retailers. In rounds, 0.30 to 1-carat goods, D-G colors and VS-SI clarities are in better demand. The same goes for rounds, 3 to 5-carats in DEF colors, VS-SI clarities.

The small Hong Kong show that took place in July was small, subdued, and with hardly any impact on the market. The Hong Kong market is seeing rising demand for fancy-shapes, bucking the global trend of declines. They are seen in 20 to 50 points, EFG colors, VS-SI clarities. There is also a certain burst of interest in 5-carat emerald shaped goods in EFG colors, VS qualities.

Israel

Similarly to other diamond centers, trading activity in the Israeli diamond market slowed down in July. Demand from the US and Far-East was limited in scope. The demand in the Israeli market is specific and localized, not to say sporadic. However, since it pertains to goods in short availability, traders a strong position on price. The result is occasional price differentiations that seem illogical between available goods and “lower” goods in shortage.

The demand is for G-J color, VS-SI goods with GIA certificates. Those goods are mainly sold online at firm prices. Chinese buyers are responsible for some of the demand in the Israeli market, mostly one-carat goods in Cape colors.

In large goods, traders are reporting demand for goods with a total price of $100,000-$150,000.

In yellows, there is demand for fancy yellows, however fancy-light and fancy-intense are not moving. 

Miners

De Beers reported production in the first half of 2018 up to 17.5 million carats. Sales volume has slowed down 3% to 17.9 million carats, however sales value increased $3.19 billion as prices rose by 3.8%.

At ALROSA, the situation was less positive. Although diamond production was up 15% in the second quarter, compared to the first quarter, on a year-over-year basis production fell by 18%. The decline in production was accompanied by a decline in rough diamond sales, which fell 11.7% in volume and 7% in value to $1.03 billion. The average realized price of rough diamonds was up 6.5% in Q2 vs Q1 2018 and 18% year-over-year.

The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.