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Rapaport Weekly Market Report 06/17/2010

Insight into trends in the global diamond industry.
Jun 18, 2010 12:00 PM   By Avi Krawitz
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RAPAPORT... Between the Lines

Rough Market: Lucara Becomes a Diamond Producer

Canada-based Lucara Diamond announced that it has started production at its Mothae mine in Lesotho and that it recovered a 53.5-carat, type IIa diamond in the first week of operations. The company also owns 60 percent of the AK6 project in Botswana, with African Diamonds holding the remaining 40 percent.

Trial mining at Mothae is expected to produce 1,000 carats per month and Lucara plans to host quarterly tenders, with the first one taking place in September. A parcel of Mothae diamonds was valued at $437 per carat in June 2009 and given a model value of $549 per carat.

The AK6 mine is expected to complete development in late 2011 and launch production in the first quarter of 2012. The proposed Botswana mine has an indicated resource of 11 million tons on its north and center lobes at a grade of 26 carats per hundred tons (cpht) and a diamond model of $223 per carat, while the south lobe contains an indicated resource of 40 million tons at a grade of 20 cpht and a modeled diamond value of $183 per carat.

These developments are positive as they will bring Lucara into a rare category of diamond mining companies with actual production from kimberlite mines, even if its output is low in the short term.

Manufacturing & Wholesale: U.S. Polished Trade Improves

The U.S. Commerce Department reported that the country’s imports of polished diamonds rose 71 percent year on year to $1.35 billion in April 2010. By volume, the imports grew 44 percent to 1.041 million carats as the average price of these diamonds increased by 19 percent to $1,294.68 per carat, compared with a year earlier. On a month-to-month basis, the imports fell 13 percent by value from their March level (see the graph below).

However, the overall trend is encouraging and signals that the market has come a long way since the recession began. The May data is expected to show a continued upward trend as the U.S. accounts for the goods that came into the country for the JCK Las Vegas show, especially after JCK confirmed the indications provided by the data, namely that the U.S. market is slowly, but surely re-emerging.




Retail: Resurgence in Diamond Auction Market


Rahul Kadakia, head of jewelry for Christie’s America, noted that prices for high-end diamonds at auction have risen about 45 percent in the past 12 months. Christie’s New York sold a cushion-cut, D, VVS1 diamond of 27 carats that achieved $131,500 per carat at its June jewelry auction, versus $130,000 per carat for a 30-carat, D color, flawless diamond sold in New York at this time last year, which Kadakia interpreted as a “sign of resurgence in the market.”

A number of high-quality diamonds have garnered strong prices on the auction circuit in the second quarter. These include:

· Christie’s London selling a rectangular-cut, 14.85-carat, D, VS1, Bulgari diamond ring for $1.1 million ($73,800 per carat.);

· Christie’s Hong Kong selling a heart-shaped, 5.01-carat, fancy vivid blue, VS2 diamond for $4.7 million ($498,000 per carat.);

· Sotheby’s selling a $7.67-per-carat, fancy intense pinkish orange, IF, diamond ring for $405,000 per carat; and

· Sotheby’s sells pear-shaped, 5.16-carat, vivid blue, IF De Beers Millennium diamond for $6.4 million ($1.24 million carat.).

Global Markets

United States: The market in New York is stable and steadily improving. There is strong demand for round, 1.00- to 1.49-carat, H+, SI1+, VG and EX-cut stones. There is also good demand for princess, 1.25-carat-plus in better qualities, where supply is weak. Demand for cushions, 2.00-carat-plus, G+, VS+ is improving. Retailers in New York report that traffic is also increasing steadily, with more clients returning to make repeat purchases. Bridal remains very strong during the current wedding season.

Belgium: There has been some mixed feedback from the JCK Las Vegas show, which has kept trading in the Antwerp market lukewarm but stable. The biggest concern remains high rough prices and the difficulty of translating those high prices to the polished market. Sellers are facing strong resistance from buyers in terms of meeting their asking prices. There are also significant supply shortages in the nicer VG+-cut goods and especially in Triple-EX goods. There is good demand for 1.00-carat stones, particularly pique goods, while stones under the carat are hot.

Israel: Trading is stable, with the market reflecting growing optimism in the wake of the JCK Las Vegas show. Manufacturers and dealers are now preparing for the June Hong Kong show and even if they are not traveling to attend the event, they are stocking in anticipation of orders from Hong Kong clients who will be there. As a result, many are manufacturing or fixing stones to be EX cut, which are more in demand. There is strong demand for better color and clarity goods, especially D, IF stones, which are trading close to list prices. Oversize stones are also selling at high prices.

India: Diamantaires in Mumbai returned from the JCK Las Vegas show in a positive mood, which helped to improve local polished trading, although activity is being held back by higher asking prices and shortages of goods. Some buyers feel the market is slightly overheated due to “impractical” price levels. There is strong demand for -0.02-carat, J+, SI-lower-pique goods and severe shortages of these goods, while melee, J+, SI-lower pique is also a hot category. There is good demand across the board for pique goods, particularly in 1.00-carat sizes. Demand for 3.00-carat, J+, VS+ is improving. The rough market slowed after the Diamond Trading Company (DTC) raised prices slightly in June and dealers grew cautious about buying for such high prices.

China: The market is stable, even though this past week was shorter due to public holidays on Monday and Wednesday. Buyers are extremely sensitive regarding any prices increases and are exerting resistance toward any attempts by sellers to raise the bar. Following a strong showing at the JCK Las Vegas show, wholesalers are looking to the Hong Kong June show to boost sales, after business slowed slightly in the wake of the May Day holiday. There is growing demand for larger diamonds above 1.00 carat, although the mainstay items remain stones of 0.30-carat to 1.10-carats, D-J, VVS-SI, GIA-certified and preferably EX cut. Demand is stable for parcel goods in 0.20-carat to 0.30-carat, H-J, VS-SI.

Hong Kong: The market is quiet as traders await next week’s June Hong Kong Jewellery & Gem Fair that begins on the 24th of the month. There is a stream of goods coming into Hong Kong in preparation for the show, but relatively little business activity. There are mixed expectations for the fair after JCK Las Vegas, although hopes have been fueled by the prospect that many Asian buyers who could not travel to Las Vegas will attend. There remains strong price resistance from buyers, but there are signs that they are slowly adjusting to the higher price levels.

Quote of the Week

“The fastest way to succeed is to look as if you're playing by somebody else's rules, while quietly playing by your own.”

- Michael Korda, British-born novelist.
 
Note: This article is an excerpt from a market report that is sent to RapNet members on a weekly basis. To subscribe, go to www.rapnet.com  or contact your local Rapaport office. The writer can be contacted at avi@diamonds.net.

Disclaimer

©Copyright 2010 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400. This Rapaport Market Report is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags: Avi Krawitz, African Diamonds, Avi Krawitz, Belgium, Bulgari, China, De Beers, DTC, Flawless Diamond, GIA, Hong Kong, India, Israel, JCK, Jewelry, Lesotho, Lucara Diamond, Manufacturing, Mining Companies, Production, Sotheby's, Tenders, United States
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