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New York Diamond Dealers Upbeat Amid Tight Supply

Demand is slow, but India’s import freeze is still having an impact.

February 22, 2024  |  Joshua Freedman
Polished diamond in hand 1280 USED 022024

Retail restocking is slow after a decent but not record-breaking holiday. The diamond market is uncertain about the rest of the year, and while inflation has eased, interest rates remain high.

Yet despite the sluggishness on the demand side, New York dealers are reporting firm pricing on the local and Indian markets. This is mostly because there aren’t enough diamonds coming out of India; the inventory surplus that froze the market in 2023 has abated.

The market is soft in general, but particularly in round, D to Z goods, said Nilesh Sheth, president of New York-based polished supplier Nice Diamonds. Fancy shapes and colors are still moving well, he noted.

In this context, “we are only adding items available at attractive prices,” Sheth revealed.

Preference for memo

Last year’s heavy price declines are deterring retailers from buying outright, according to another New York-based polished supplier, who preferred to remain anonymous. Instead, these jewelers are taking goods on memo, giving them the flexibility of having the diamonds without the risk involved — although this comes at a higher cost.

When they are replacing inventory, he said, it’s in core categories such as VS2 to SI1 clarities and F to H colors.

However, New York dealers are showing more optimism than they were in the fall, the anonymous supplier observed.

“Six months ago, a lot of the dealers also were not buying too much, and that’s why the supply glut accumulated” at their suppliers, such as at manufacturers, he recalled. “But now all the dealers, in the last two or three months of last year, sold down a good chunk of their inventory, and business was pretty decent toward the end of last year. All the dealers are back in the market to look at goods to buy.”

The preference for memo reflects caution following last year’s slump, according to Ari Jain, chief financial officer at wholesaler House of Diamonds, which has headquarters in New York and manufacturing facilities in Surat, India. However, there’s also a regretful reluctance to buy at new, higher prices when people could have bought cheaper a few months ago, he explained.

As the market improves, “we expect [the] ratio of direct purchase to purchase after memo to improve and increase,” Jain predicted.

Less Indian supply

India’s two-month voluntary freeze on rough imports is having an ongoing effect on the American market. Production in Surat has increased since shipments resumed on December 15, with India’s rough imports rising 43% year on year to $1.17 billion in January following declines in November and December. But only some of those new goods have reached the market so far.

This has led to a “tightness” in supply, according to Sheth. As a result, items that were selling for 50% off the Rapaport Price List in October and November are now going for 35% off, he attested.

The shortages are most acute in round and fancy-shape, 3-carat and larger, I to L diamonds with clarity ranging from VS1 to the better I1s, said Jain at House of Diamonds.

“Demand is lower, but the supply is much, much lower,” Jain attested.

When replacing inventory, buyers are receiving quotes 5% higher than for the original goods, he said. For example, according to Jain, an 8-carat diamond will sell for 15 percentage points more than two months ago — referring to a reduction in the size of the discount off the Rapaport list.

“Before, there were crazy discounts,” Jain continued. “Now there is a lot of seller’s remorse.”

Jain has sold a lot of diamonds in the 0.30-, 0.40- and 0.50-carat sizes with Gemological Institute of America (GIA) grading reports, he said. Melee is also hot, especially in fancy shapes and at the lower prices points, such as the “+2 -11” sieve size with G color and SI2 to SI3 clarity, he noted.

“We have ordered but not been able to buy [these melee categories],” he revealed.

The supply squeeze is bigger in larger categories, especially round, 1.50- to 3.99-carat diamonds with clarity from VS2 to better SIs, the earlier anonymous supplier contended. Demand for these categories has also had less competition from lab-grown diamonds, he argued.

Price mismatch

With India now processing rough for the past two months, the question is what will happen when more of the fresh goods hit the market. De Beers sold $370 million in rough at its January sight, the most since August. That production takes between one and two months to be ready as polished.

However, for now, the market is in an awkward situation: Indian sellers have raised prices because of the shortfalls, but US dealers aren’t keen to close transactions at those rates unless it’s for an immediate order.

This has manifested itself as an inability for US dealers to find round goods at profitable prices, the earlier anonymous supplier said. Indian sellers have raised their pricing at a faster rate than their US counterparts — often the case when the market is on an upward trend, as India is more plugged in to the rough sector, he explained. This means Indian prices of rounds can be as high as US memo prices, making it hard for dealers to profit when buying from India and supplying to US retailers.

“I legitimately can’t find things with enough of a spread between the overseas prices and the US dealer listed prices,” the anonymous supplier said.

But sometimes the US traders have to accept the new, higher prices.

“If there is a specific call or a need, we have no choice but to pay what [the] supplier asks and fill the order,” Sheth acknowledged.

Main image: A polished diamond in a hand. (Shutterstock)

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Polished diamond in hand 1280 USED 022024 New York Diamond Dealers Upbeat Amid Tight Supply

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