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Rapaport TradeWire May 7, 2010

Global diamond trade improving with strong activity in cutting centers.
May 6, 2010 6:00 PM   By Rapaport
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  Rapaport TradeWire  
Rapaport TradeWire
RAPAPORT NEWS SERVICE | MAY 7, 2010   www.rapaport.com | news@rapaport.com
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RapUp May 7, 2010

European financial crisis expected to reduce consumer demand and increase investor demand as euro deteriorates. Global diamond trade improving with strong activity in cutting centers. Discounts narrow amid reduced availability and high rough prices. Indian market hot for inexpensive pique goods up to 1 ct. Prices for smaller under the carat certs improving but discounts remain relatively high. Caraters firming. Large 3ct+ stone prices increase significantly with fine large XXX approaching list. Blue Nile 1Q sales +19% to $74m and profit +23% to $2.4m. Birks & Mayors 4Q sales +29% to $64m, FY10 sales -6% to $255m. India's Titan Industries FY’10 group sales +22% to $1.05b, profits +53% to $56.4m. Hong Kong March precious metals jewelry exports +36% to $353m, imports +87% to $509m. Stellar Diamonds buys full ownership of Sierra Leone Kono mine from Petra Diamonds.

RapNet Data: May 7, 2010
Diamonds 645,534
Value $4,127,787,424
Carats 733,135
Average Discount -30.45%
RapNet Asking Price

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Melee Tender 
Approximately 20,000 cts of polished round and fancy diamonds ranging in size from -2.5 sieve plate to 1ct +. Qualities vary from commercial to very fine including some breakout assortments. Excellent buying opportunity for diamond and jewelry manufacturers.

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Please note this tender closes at 2 p.m. May 14

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New Date - Sunday, June 6
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Venetian Hotel, Level 4

Rapaport Breakfast:
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  The latest [Luxury Consumption Index] shows that ultra-affluents [incomes above $250,000] are spending at pre-recession levels, while the aspirational consumers [incomes $100,000 to $249,999] are holding back. But even with their exuberant amounts of spending, the ultra-affluents can't sustain recovery in the luxury market alone. In order to generate real growth in the luxury market, marketers and retailers are going to have to entice the aspirationals back into spending.

Pam Danziger | President of Unity Marketing

Hong Kong Bans Rough From Cote d'Ivoire

The Diamond Federation of Hong Kong, China Ltd. (DFHK) informed the diamond trade that importing rough from Cote d'Ivoire was prohibited. The rough trade ban was approved on April 30 and is set to expire at midnight on October 31, 2010. Those in Hong Kong who do not follow this regulation face "substantial penalties, which may amount, in some cases, lead to imprisonment for seven years and/or a fine."

The UN Security Council (UNSC) has also upheld long-running diamond sanctions on Cote d'Ivoire through October, at which time the world body will again review this diamond embargo.

Stay informed on trade issues in Hong Kong by visiting DFHK's website.

Rapaport Weekly Broadcast

Buxbaum Jewelry Advisors has learned important lessons during the recession: Consumers are still buying jewelry, just with greatly reduced budgets, and that struggling retailers can certainly turn around their businesses instead of going out of business. One size does not fit all, certainly, but the key to success involves flexibility, strategic promotions and growing brand appeal across a broader spectrum of the marketplace. WATCH NOW.

Blue Nile 1Q Revenue +19%

Blue Nile's first-quarter sales rose 19 percent to $74.1 million, this increase was compared with an 11 percent drop one year ago. Cost of sales rose 18.5 percent to $58.3 million. Profits for the quarter improved 23 percent to $2.4 million. International sales grew 71.4 percent to $9.6 million, but excluding the impact from changes in foreign exchange rates, international sales increased 51.8 percent. This means that sales in the U.S. came to $64.5 million, an increase of 14 percent. Gross profit improved 10 basis points to 21.3 percent compared with 21.2 percent for the first quarter of 2009.

Titan's Fiscal-Year Sales +22%

Titan Industries' fiscal-year net sales rose 22 percent year over year to $1.05 billion (INR 46.77 billion), with jewelry sales up 27 percent to $786 million and watch sales increasing by 13 percent to $230.9 million. The group noted that its watch and jewelry segments also benefited from a good wedding season in the first quarter. 

Titan cut its expenses by 22 percent to $973.8 million for the year, while its net profits jumped 53 percent year over year to $56.4 million. The retailer added 52 stores during the fiscal year, bringing its store total to 539.

Finlay Posts $2M Loss for March

Finlay Enterprises posted a net loss of $2.4 million in March 2010, the most recent month that the company provided operational data to bankruptcy court. Cash from liquidation sales totaled $12.2 million for the month. Since filing for Chapter 11 in August, Finlay has collected $273.9 million in merchandise sales and reported a net loss of $97.7 million.

Birks & Mayors' Fiscal-Year Sales Drop 6%

Birks & Mayors' fiscal-year sales fell by 6 percent to $255.1 million, with its comparable-store sales down by the same percentage. The company's comparable-store sales in the U.S. dropped 12 percent, while in Canada, they decreased by just 1 percent. Birks & Mayors forecasted a net loss of between $18 million and $20 million for the year.

Kristall's Profits Fall 44%

Kristall's profits fell by 44 percent in 2009 to $302,420 as its debt costs mounted and the company imported more rough during the year. ALROSA, the company's main supplier, did not sell goods in the first half of 2009, so Kristall had to import to keep up with polished demand. The company's polished sales rose slightly to $263.5 million, with 0.7 percent of goods being sold domestically, 13.5 percent was sold to Israel, 11.2 percent went to the United Arab Emirates (UAE), 8.6 percent was sold to the U.S., 4.6 percent to Hong Kong and 3.7 percent to Belgium. Kristall's inventory shrank by 56 percent to $51 million for the year.

Sotheby's Revenue Rises 89% in 1Q

Sotheby's revenue rose by 89 percent to $101.9 million in the first quarter, while its expenses fell by 15 percent to $94 million. The company reported a net loss of $2.2 million, compared with the loss of $35 million it posted one year ago.

Zale's Goal Within Reach

Zale announced in February that it had a 90-day window during which to secure as much as $150 million in new equity. Now, according to insiders, that goal is within reach and the company's plans could be made public next week. The insiders have suggested that Golden Gate Capital will secure the funds and gain two seats on Zale's board. Meanwhile, Zale was given a four-week extension by Citibank to pay a $6 million penalty while the two negotiate new credit-card-service arrangements.

Hong Kong's 1Q Jewelry Imports +53%

Hong Kong’s precious metal jewelry imports increased by 53 percent to $1.29 billion during the first quarter. Meanwhile, the country’s precious metal jewelry exports grew by 29 percent to $885 million for the quarter. Domestic exports were up by 34 percent to $195 million, while re-exports rose 27 percent to $690 million.

Luxury Goods Sales, Prices Remain Strong

MasterCard Advisors’ SpendingPulse provided data on retail sales in the U.S. for April and concluded that overall, the results were mixed. Sales for the luxury goods category, however, again enjoyed easy year-over-year comparisons and very strong price increases, with the Price Index being up 10.6 percent. Luxury good sales increased by 15.5 percent compared with April 2009.

Across retail chain-stores in the U.S., sales in April on a same-store basis rose 0.8 percent, slightly ahead of earlier predictions, according to the International Council of Shopping Centers (ICSC).  When combining March and April figures to reflect Easter spending, the increase was 4.9 percent, to which ICSC called "likely above what will be sustainable for the year."

Retailers Must Entice Affluents to Spend

Unity Marketing's latest research on affluent consumers' shopping habits found that important structural changes are taking place in that consumer confidence is split according to income. Those with incomes of $250,000 or more, who are known as "ultra-affluents," increased their spending on luxury goods by 22.6 percent between the fourth quarter of 2009 and the first quarter of 2010, while the lower-income, "aspirational" affluents with incomes between $100,000 and $249,999 increased their spending by just 1.9 percent.

Since aspirational affluents comprise 21 million households in the U.S., Unity Marketing warned luxury marketers and retailers that they must entice these shoppers to spend because ultra-affluents cannot sustain the retail recovery alone. Unity also found that 78 percent of affluents felt the U.S. is still in a recession.

London Robbers Strike Tiffany and De Beers

Ten masked men raided boutiques of Tiffany & Co. and De Beers after hours in London's Westfield shopping center on Tuesday. The exact value of the goods stolen from the stores was not confirmed; however, estimates range from hundreds of thousands of dollars to $4 million. Thieves entered the shopping center through an unlocked fire exit door and then smashed the boutique windows with sledgehammers to gain entry and stole diamonds, jewelry and watches. The gang was in and out of the jewelry stores in 90 seconds.

Westfield was said to have the most sophisticated security in Europe, including motion alarms, CCTV, automatic plate recognition on parked cars and holding cells.

IDB Still Stalled

The International Diamond Board (IDB) is still on the table, but progress on the generic marketing initiative continues to be delayed by the absense of ALROSA. Regular meetings are taking place between the three remaining members: De Beers, Rio Tinto and BHP Billiton, and they continue discussions with the Russian mining company. The concept of an  industry-wide, generic marketing body was initiated by ALROSA in July 2008, but the mining giant withdrew its participation after implementing a change to its senior management team.

WDC Opens Registration for St. Petersburg

The World Diamond Council (WDC) opened registration for its seventh annual meeting, which will be held in St. Petersburg, Russia on July 14 and 15. The annual WDC meeting will begin with committee working sessions on July 14. The official opening will take place on the morning of July 15 and be immediately followed by the WDC Plenary.

Boaz Hirsch, the current chair of the Kimberley Process (KP), will be the keynote speaker. The meeting will commence the day after the conclusion of the World Diamond Congress of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA), which is taking place in Moscow.

Industry Movers and Shakers

Jewelry style expert Michael O'Connor will be expanding co-marketing opportunities for Couture with other luxury brands across a variety of disciplines. Gem expert Gary Roskin will teach Gem-A's introductory foundation lab class at New York's Fashion Institute of Technology (FIT) on May 15 and May 16.

The World of Gems Conference II announced the following speakers for its October conference: James Shigley,  Shane McClure, Elizabeth Strack, John Emmett, Christopher Smith, Jon Philips, Diane Flora and Michael Evers.

The JCK Vegas educational panel, titled "Diamond Dialogue — the Kimberley Process and Consumer Confidence," will be held on June 3 and feature Eli Izhakoff, Brad Brooks-Rubin, Matt Runci, Cecilia Gardner, Noora Jamsheer, John Hall and Dorothee Gizenga.

De Beers to Reduce Staff at Finsch

De Beers Consolidated Mines plans to reorganize operations at its Finsch diamond mine in South Africa, noting that its operating costs are on the increase as declines in diamond prices continue. The reorganization will also translate into a headcount reduction of 350. The Finsch mine employs 903 people, according to De Beers. The company's operations in South Africa have also been impacted by a strong rand against the dollar, which reduces influx of local currency for the mine.

FLO, ARM Approve Fair Trade Gold Standard

The Fair Trade Labelling Organizations International (FLO) and the Alliance for Responsible Mining (ARM) developed the first-ever, third-party independent certification for gold to bring about social, environmental and economic development in artisanal and small-scale mining communities. This partnership enables both organizations to meet shared strategic objectives, creating a system designed to ensure that artisanal and small-scale miners can earn better prices for their gold. The partnership will be indicated on the products via a co-labeling hallmark that utilizes both the "FAIRTRADE" and "FAIRMINED" hallmarks.

De Beers Spends $292M in North Canada

De Beers Canada spent $292 million on goods and services for its Snap Lake and Victor mine operations in 2009. The company spent $152 million on service contracts for Snap Lake, 74 percent of which was supplied by northern businesses and 51 percent of which was provided by aboriginal suppliers. At Victor, pictured, De Beers spent $119 million on goods and services, with 32 percent of this total supplied by aboriginal businesses. De Beers Canada contributed $3.7 million in corporate social investments for education, youth literacy and capacity-building for the year.

For the week ending May 6, 2010:

  May. 6 Apr. 29 Chng.  
$1 = Euro 0.785 0.755 0.030  
$1 = Rupee 45.37 44.42 0.9  
$1 = Israel Shekel 3.78 3.73 0.05  
$1 = Rand 7.67 7.36 0.31  
$1 = Canadian Dollar 1.03 1.01 0.02  
Precious Metals        
Gold $1,207.80 $1,167.10 $40.70  
Platinum $1,649.00 $1,730.00 -$81.00  
Stock Indexes       Chng.
BSE 16,987.53 17,503.47 -515.94 -2.9%
Dow Jones 10,517.98 11,167.32 -649.34 -5.8%
FTSE 5,260.99 5,617.84 -356.85 -6.4%
Hang Seng 20,133.41 20,778.92 -645.51 -3.1%
S&P 500 1,127.77 1,206.77 -79.00 -6.5%
Yahoo! Jewelry 882.59 972.94 -90.35 -9.3%
Birks & Mayors $1.70 $0.95 $0.75 78.9%
Blue Nile $51.11 $55.31 -$4.20 -7.6%
Charles & Colvard $2.43 $2.31 $0.12 5.2%
DGSE Companies $2.42 $2.60 -$0.18 -6.9%
Fuqi Intl. $9.60 $11.00 -$1.40 -12.7%
JCPenney $28.12 $31.11 -$2.99 -9.6%
Kohl's $54.87 $56.56 -$1.69 -3.0%
LJ Intl. $2.42 $2.66 -$0.24 -9.0%
Macy's $22.62 $24.68 -$2.06 -8.3%
Man Sang $1.97 $2.33 -$0.36 -15.5%
Movado Group $11.79 $13.60 -$1.81 -13.3%
Nordstrom $40.98 $42.91 -$1.93 -4.5%
Saks $9.00 $10.25 -$1.25 -12.2%
Signet $30.42 $32.47 -$2.05 -6.3%
Sotheby's $33.61 $35.11 -$1.50 -4.3%
Tiffany $45.27 $49.95 -$4.68 -9.4%
Walmart $53.52 $53.70 -$0.18 -0.3%
Zale $2.64 $3.39 -$0.75 -22.1%
Bulgari €6.06 €6.34 -€0.28 -4.4%
Bijou Brigitte €117.50 €130.20 -€12.70 -9.8%
Damiani €0.87 €0.94 -€0.07 -7.4%
LVMH €83.66 €86.93 -€3.27 -3.8%
PPR €98.43 €102.00 -€3.57 -3.5%
Richemont CHF 37.92 CHF 40.27 -CHF 2.35 -5.8%
Swatch Group CHF 304.60 CHF 322.10 -CHF 17.50 -5.4%
Theo Fennell (pence) 36.00 36.00 0.00 0.0%
INDIA (rupee)        
Classic Diamond 22.15 23.00 -0.85 -3.7%
Gitanjali Gems 113.20 115.95 -2.75 -2.4%
Goldiam Intl. 43.15 46.60 -3.45 -7.4%
Rajesh Exports 122.50 125.15 -2.65 -2.1%
Ren. Jewellery 88.50 79.35 9.15 11.5%
Su-Raj Diamonds 48.55 49.50 -0.95 -1.9%
Titan 2,170.60 2,111.05 59.55 2.8%
Zodiac JRD 33.55 37.40 -3.85 -10.3%
Suashish Diamonds 253.50 229.05 24.45 10.7%
Michael Hill NZD 0.73 NZD 0.73 NZD 0.00 0.0%
Harry Winston CAD 11.50 CAD 10.93 CAD 0.57 5.2%
Lucara Diamond CAD 0.86 CAD 0.97 -CAD 0.11 -11.3%
Mountain Province CAD 2.50 CAD 2.65 -CAD 0.15 -5.7%
Peregrine Diamonds CAD 2.27 CAD 2.50 -CAD 0.23 -9.2%
Rockwell Diamonds CAD 0.07 CAD 0.07 CAD 0.00 0.0%
Shore Gold CAD 0.80 CAD 0.86 -CAD 0.06 -7.0%
Stornoway Diamond CAD 0.59 CAD 0.64 -CAD 0.05 -7.8%
True North Gems CAD 0.08 CAD 0.08 CAD 0.00 0.0%
UK (pence)        
African Diamonds 35.20 37.25 -2.1 -5.5%
Anglo American 2,545.50 2,880.00 -334.5 -11.6%
BHP Billiton 1,872.50 2,089.50 -217.0 -10.4%
Firestone Diamonds 40.00 41.50 -1.5 -3.6%
Gem Diamonds 280.00 290.00 -10.0 -3.4%
Gemfields 5.01 5.13 -0.1 -2.3%
Mwana Africa 9.12 10.25 -1.1 -11.0%
Namakwa Diamonds 36.50 35.15 1.4 3.8%
Petra Diamonds 79.25 83.00 -3.8 -4.5%
Rio Tinto plc 3,106.50 3,533.00 -426.5 -12.1%
Stellar Diamonds 13.93 13.50 0.4 3.2%

Polished and rough trading activity

Surat’s diamond community appealed to Gujarat state for an international airport, which would ultimately facilitate new trade in the city’s diamond center. Gem & Jewellery Export Promotion Council (GJEPC) has made additional suggestions to improve trade including enabling local banks to decide financing, allowing rough consignment imports, supporting research and sourcing advance technology.

POLISHED: Steady demand but limited acivity due to local holiday and transport system issues.
-1 point: Very Good demand: +$100 whites.
-2 point: Fair Demand: -$350 whites & $250-$350 OWTTLC
2-7 point: Good demand: +$100 whites.
Fair Demand: $250-$350 OWTTLC
8-18 point: Good demand: +$500 whites.
Fair Demand: -$400 whites
20 points: Fair demand: -$300 & +$600 whites.
25 points: Good demand: -$350 & +$700 whites.
33 points: Good demand: $300 - $500 whites.
50 points: Good demand: $500-$700 & +$1000 whites.
75 points: Good demand: +$2000 & $700-$900 whites.
1 carat+: Very good demand: +$1000 whites.
Good demand: -$1000 whites.
-3 point: Fair demand: $200-$250 whites.
+3 point: Fair demand: $250-$300 whites.
+9-18 point: Fair demand: $250-$350 whites.
20 point: Fair demand: $700-$750 whites.
25 point: Fair demand: $800-$850 whites.
50 point: Fair demand: $400-$700 & $1600-$1,800 whites.
75 point: Fair demand: $800-$1,200 whites.
1 carat+: Good demand: +$2,500 whites.
Fair demand: $1000-$2000 whites
-6 point: Fair demand: $250-$350 whites.
+7-18 point: Fair demand: $250-$400 whites.
20 point: Fair demand: $250-$400 & $900-$1,000 whites.
25 point: Fair demand: $250-$400 & $1,100-$1,200 whites.
33 point: Fair demand: $250-$400 & $1,300-$1,500 whites.
50 point: Fair demand: $1,600-$1,800 whites.
75 point: Fair demand: $2,600-$2,800 whites.
1 carat+: Good demand: $300-$600 & +$1,000 whites.
Tapers & Baguettes
Good demand: $600-$800 +5mm whites. $250-$325
2mm-2.5mm whites; $350-$400, 2.5mm-3mm whites;
             $400-$450 3mm-4mm, $500-$600 4mm –
             5mm & $175-$250 +2mm-3mm whites.
ROUGH: Price increases widened gap between asking and buying prices for rough. Some activity is seen in clivage and mixed lots.
1-5 point: Good demand: $85-$125 makeables; $95-$195 crystals.
$45-$75 makeables.
Fair demand: $7-$20 & $45-$90 OW TTLB & TTLC.
6-20 point: Very Good demand: $150-220 crystals; $100-$180 makeables.
Good demand: $60-$110 fancy shapes; $45-$75clivage.
Fair demand: $50-$90 OW TTLC & TTLB rounds.
21-50 point: Very Good demand: $190-270 makeables;
$110-$200 & $220-$290 crystals.
Good demand: $80-$190 fancy shapes;
$95-$200 rounds; $50- $90 clivage.
Fair demand $20-$40 OW TTLC & TTLB.
0.51-1.00 carat: Very Good demand: $170-$330 makeables;
$120-$250 & $280-$460 crystals.
Good demand: $80-$120 makeables;
$90-$200 fancy shapes; $55-$110 clivage.
Fair demand $60-$90 OW TTLC & TTLB.
1.01-2.00 carat: Very Good demand: $230-$580 rounds; $280-$735 crystals.
Good demand: $90-$120 clivage; $190-$370 all fancy shapes.
Fair demand: $140-$180 OW TTLC & TTLB.
2.01-3.00 carat: Good demand: $250-$1,000 makeables; $350-$1,300 crystals;
$400-$800 fancy shapes; $210-$300 clivage.
Fair demand: $100-$325 flats & TTLC & TTLB
$350-$800 OW.
5.00 carat+:  Good demand: $1,000+ makeables, crystals & all fancy shapes till L color.
Mixed Lot: Good demand: $2-$40.

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Tags: African Diamonds, Alrosa, Anglo American, Auctions, Banks, Belgium, BHP Billiton, Bulgari, China, Consumers, De Beers, De Beers Canada, Fair Trade, Finlay, Firestone, Gem Diamonds, GIA, Harry Winston, Hong Kong, ICSC, India, International Diamond Board, Israel, JCK, Jewelry, Kimberley Process, Lucara Diamond, LVMH, Michael Hill, Movado, Petra Diamonds, Rapaport, Regulation, Richemont, Rio Tinto, Rockwell, Russia, Signet, Sotheby's, South Africa, Stellar Diamonds, Surat, Theo Fennell, Tiffany, Titan, Victor Mine, World Diamond Council, World Federation of Diamond Bourses (WFDB), Zale
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