RAPAPORT… Prices continue to go up, despite the May 13 and May 20 increases in the Rapaport List. Generally, discounts and premiums remain the same as they were prior to the increases. But in some cases, especially for high-color VS and SI, the market prices are even higher than before, with most triple EX stones in these clarity grades trading at premiums.
Sales at the retail level have slowed considerably in line with the seasonal summer stall, but demand still outstrips supply for VS and SI. Whenever these are on offer, they usually sell quite quickly, provided the asking prices are not exorbitant.
Retailers are now working more off memo goods because they are not prepared to buy at the present price levels. Discounts even for carat sizes are in single digits and some grades in carat sizes are going for premiums. Most large-size stones are now fetching premiums.
Rising Rent
Jewelry retailers are also feeling the erosion of their profit margins, with overhead costs rising at an alarming pace. Rents have been escalating to unprecedented levels in recent months, mostly fueled by foreign brand names renting prime shopping space at virtually any price. Having a shop in Hong Kong is seen as a way of advertising a brand to the tourists from Mainland China. Hong Kong is now considered to be one of the most expensive markets in which to rent retail shop space.
Many jewelry retailers have been chased out of the popular retail areas and forced to move their operations from street-level stores to upper-level showrooms in office buildings. This, of course, cuts down on their walk-in traffic, especially from tourists.
Tourists From India
The number of Indian tourists has been increasing lately. First, they can visit Hong Kong without a visa, which makes a trip there almost as easy as traveling within India. Second, the Indian economy is buoyant and Indian consumers feel they have money to spend.
Diamond buyers from India also have been coming to Hong Kong to try to mop up some bargains. But bargains are not so easy to find, with sellers following the prevailing market prices. Still, demand from Indian diamond traders remains strong. They are always in the market for anything over 1 carat, but they are especially interested in stones larger than 3 carats in better clarities and in colors from H all the way down to K and L.
Many buyers from India attended the recent JCK show, and companies that had the goods Indian buyers wanted did very well. The Indian buyers were also happy with their purchases, especially those who managed to find some American exhibitors who perhaps were not in tune with the present prices or needed to liquidate some of their inventory. In that case, buyers could get goods at very attractive prices.
Counterbalance
The recent increase in the price of rough at May’s Diamond Trading Company (DTC) sight centered mostly on higher qualities, which are reported to be around 10 percent to 15 percent higher. Other goods did not change in price or posted smaller increases. The big question is whether the price hikes counterbalance the speculative premiums that exist for the rough, or if the market will see further polished price increases over the coming months. Such a scenario would lead to very hard bargaining, with buyers resisting higher prices and sellers trying to push up prices even further.
June was the last chance to do business before the diamond market took its usual summer break. It will be interesting to see how and when business will resume — whether sellers will be willing to hold onto their goods until late August, when the market starts to move again in advance of the September Hong Kong jewelry show, or whether they will let go of goods before then without holding out for the last penny. Buyers also are anxious to have goods in their inventory in case of even higher prices after the summer.
Some dealers who exhibited at the JCK show had to forgo many orders, especially those that involved jewelry with very small diamonds, which is now in vogue. Would-be sellers were afraid they might not be able to fulfill the orders because the prices for small diamonds have gone up so much over the past few months and seem to be increasing on a weekly basis. The prices being charged for these small goods are unprecedented. Goods below sieve 3 are now selling for more than their counterparts in 10-per-carat. As the sizes get smaller, the price goes up significantly, helped along by the fact that there is an acute shortage of these sizes.
The Marketplace
• Demand for large stones has softened, but prices remain high.
• Carat sizes are moving well, but buyers uncomfortable with the high prices now target stones with larger discounts. Due to general shortages in VS-SI, VVS2 is beginning to move.
• Dossiers in 50 points and larger have a steady demand, but demand for goods in high colors in VVS is almost nonexistent. The main demand is for VS-SI.
