Market slows before holidays

November 10, 2022  |  Joshua Freedman
 image

Rising inflation and the Russia-Ukraine war continue to impact the industry.

The diamond market was sluggish in October as trading centers slowed for the Jewish holidays. Indian manufacturers also wound down before Diwali, with many reducing their rough buying and polished production because they already had enough inventory.

Retail demand was uncertain ahead of the holidays: US consumers felt the pinch from inflation, while China had not fully recovered from lockdowns earlier this year. The Russia-Ukraine war continued to impact the sector, though midstream stockpiles were high despite sanctions on Alrosa.

Polished prices declined, with the RapNet Diamond Index (RAPI™) for 0.50- and 1-carat diamonds both slipping 2.6% between October 1 and 20. The index for 0.30-carat stones fell 1.8%, while 3-carat goods suffered a 1.5% drop.

“This is a volatile time for the diamond industry worldwide, with uncertainty concerning rising inflation in the US and the war in Ukraine,” Israel Diamond Exchange (IDE) president Boaz Moldawsky said in an October statement. “We are still looking forward to a successful holiday season, although it is likely that it won’t reach the levels of 2021.”

Retail Uneven

The September Jewellery & Gem World (JGW) trade show gave the market a boost, taking place temporarily in Singapore due to quarantine rules in Hong Kong, its usual venue. Some 11,125 buyers attended from 97 countries and regions, according to organizers at Informa.

American retail revenues for all products combined were flat in September compared with the previous month and rose 8% year on year, the US Census Bureau reported. While demand was solid, “sales were uneven across retail categories, and inflation is the main factor that is determining how much shoppers are willing to spend,” explained Jack Kleinhenz, chief economist at the National Retail Federation (NRF). “Households are tapping into savings, accessing credit, and reducing their savings contributions as they meet higher prices head-on.”

Rough down ahead of Diwali

Weaker demand from Indian cutters dampened activity in the rough market. De Beers sold $500 million in goods at its September sight, 2% more than a year earlier but 22% less than in August. For stones above 1 carat, the miner will increase customers’ buyback allowances — the proportion of purchases sightholders can sell back to De Beers — at the next trading session, insiders told Rapaport Magazine.

“Demand for our rough diamonds…was in line with expectations at what is a traditionally quieter time of year for the diamond industry as polishing factories in India prepare for closures ahead of the Diwali holidays,” De Beers CEO Bruce Cleaver said following the September sight.

Larger rough goods have seen the sharpest downturn. Trans Atlantic Gem Sales (TAGS), which holds rough tenders in Dubai, said customers had left 45% of diamonds on the table at its latest sale in September. Stones weighing 0.75 carats or more took the biggest hit, the company reported. “A stagnant Chinese market and a cautious consumer globally represent just a couple of the problems in a pipeline of growing rough and polished stocks, liquidity shortages and high interest rates,” TAGS said.

At press time, factories in Surat were set to close for around three weeks over the Diwali season. Once workers return in November, the main question will be whether Chinese demand will recuperate in time for the Lunar New Year on January 22, 2023.

One growth area for greater China’s jewelers has been gold. A drop in the metal’s prices has enticed consumers to spend, with Hong Kong-based Luk Fook reporting a 40% jump in same-store sales at self-operated shops in the second fiscal quarter, which ended September 30. In the first two weeks of October, the brand’s Hong Kong and Macau markets “maintained considerable growth,” it said, attributing this to “the surging demand in gold products” due to the drop in prices and the post-quarantine resumption of tourist traffic.

Share

Market slows before holidays

Share with others

Search

Date