RAPAPORT…
The major industry trade shows play an important role as
early indicators of diamond pricing trends abecause the show’s exhibitors are
working to see how high they can take their prices and buyers are negotiating
to pay the lowest possible price. Which side has the advantage at any
particular show depends on existing demand and supply and anticipation of the
future market.
Sales activity and demand at the March Hong Kong show this
year were influential in moving prices even higher. The result was a certain
amount of price anxiety and increased purchases at and after the show by
Mainland Chinese buyers, who feared further price hikes following the show.
When prices during the June Hong Kong show were driven even higher, the Chinese
buyers began to lose their sense of security with the price level and started
wondering how long the high prices could be sustained. The all-important
additional question, of course, was how much they could lose if they continued
to buy at this high price and the market went south after the show. And that’s
exactly what happened when the market price dropped significantly in August.
The Downside of Lower Prices
For Chinese buyers, price declines are not always good news,
especially for the wholesalers when they buy high from manufacturers and are
unable to sell to retailers at a profit if the price drops. For retailers
themselves, price drops affect consumer confidence. In preparation for the
retail season of the National Day Golden Week holiday that starts October 1,
August and September should have been among the busiest months of the year for
wholesalers. But buyers have been hesitant to make large stock purchases.
While demand is still steady, global financial uncertainties
make it difficult to predict the future. On the other hand, many retailers who
had speculated during previous price hikes already had purchased large
inventory and refrained from aggressive buying at the September shows.
The Shenzhen Show
For Chinese diamond and jewelry trade members, the September
Hong Kong and Shenzhen shows are among the most important events of the year.
The 2011 Shenzhen International Jewelry Fair, held from September 14 through
18, expanded to more than 1,000 exhibitors from 25 countries, in about 2,600
booths and 565,000 square feet of space. The booths were split pretty evenly
among exhibitors from Shenzhen city, from overseas and from Mainland Chinese
companies based outside Shenzhen.
The Shenzhen show is very focused on jewelry, including
gold, platinum and jade jewelry — either with or without diamonds or colored
gemstones. Lots of jewelry manufacturers use the show to take orders. For the
retail chains, the show was an opportunity to further market their corporate images
and product brands, and many of them tried to sign up more franchisees. Many
dealers exhibit diamond jewelry but the number of loose diamond exhibitors is
much smaller in Shenzhen than at the Hong Kong show and they serve mostly
existing clients.
Meanwhile, the Shenzhen Jewelry Festival, held on the same
dates as the Shenzhen Jewelry Fair, is designed to enhance Shenzhen’s image as
the hub of jewelry manufacturing. The festival also features the 14th annual
Shuibei Jewelry Purchasing Event. Concentrated in the Shuibei area of the Luohu
District in Shenzhen are more than 1,600 jewelry manufacturers, representing 70
percent of the nation’s manufacturing. The Luohu District also hosts more than 20
top Chinese jewelry brands, 2,300 jewelry and gemstone companies and 14 large
international jewelry and gemstone marketplaces, accounting for 70 percent of
the wholesale jewelry trading volume of China.
The Hong Kong Show
Unlike 2010, when overall show attendance was negatively
affected by a clash of Shenzhen and Hong Kong show schedules on the same days,
the Hong Kong show this year immediately followed the Shenzhen show. The Hong
Kong Jewellery & Gem Fair, held September 19 to 25, featured more than
3,300 exhibitors from 46 countries and regions. The show organizer projected
attendance of more than 45,000 buyers from 135 countries and regions. It
continued to occupy two venues — one for finished jewelry in the central city
and the other for loose diamonds, gemstones, materials and equipment at the
airport — for a total exhibition space in excess of 2 million square feet.
Chinese buyers at the Hong Kong show, although they
purchased a decent amount of goods, were very price sensitive and were always
testing the price level. “There are buyers and demand, but the buyers are
cautious. Most buyers are afraid of falling prices so they were buying the
minimum that they need. There is no speculative buying,” said Hertz Hasenfeld,
vice president of Hasenfeld-Stein Inc., a diamond manufacturer with
headquarters in New York City and a diamond factory in Mainland China. “We had
many Chinese in my booth buying but they were pushing me a little harder on the
price than before and we had to give an extra percentage discount.”
The Marketplace
- Wholesale activity picked up in September as retailers
prepared for the National Day Golden Week holiday season — a big wedding period
— that starts October 1. - At the same time, retailers who had bought a great deal of
goods when prices were rising so fast in previous months, held off buying in
large quantity when prices started to drop after the June Hong Kong show, and
were only buying what they needed for the short term. They did so out of fear
of further declines. - Current asking prices are around 5 to 10 percentage points
lower than June’s peak prices.
