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What Happened in the Diamond Trade in 2019

A month-by-month digest of Rapaport Weekly Market Comments.
Jan 2, 2020 4:18 AM   By Rapaport News
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RAPAPORT... Last year will go down as a difficult one for the diamond industry. While manufacturers took the biggest hit with thin profit margins, tight liquidity and excess supply, miners also suffered as rough demand slumped. Plenty of global events also affected the trade, from stock-market volatility to street protests in Hong Kong.

The Rapaport Weekly Market Comment is a much-read summary of sector activity, covering major news and trends that impact diamond supply and demand. Here, we provide a digest of those regular bulletins by month, showing how the situation changed throughout 2019.

January

• Polished suppliers start 2019 with high inventory of small goods up to 0.30 ct.
• Rough sentiment weak as manufacturers face tight profit margins, high inventory and less financing.
• Indian bank credit down 30% due to weaker rupee and change in lending policy.
• ICICI Bank to close Antwerp branch.
• Rough dealers’ premiums decline on secondary market, with continued weakness in low-value goods at $505M De Beers sight.
• Retail outlook optimistic, boosted by tax reforms and low unemployment, but stock-market volatility, higher interest rates and US-China trade tariffs may slow luxury spending.
• Conference Board Consumer Confidence Index falls to 18-month low.
• Reduced expectations for Chinese Year of the Pig after 4Q slowdown.
• De Beers approves changes to its disclosure rules.
• Tiffany & Co. declares geographical provenance of diamonds over 0.18 ct.

February

• Manufacturers maintaining low production as profit margins are squeezed by high rough prices.
• Suppliers selling at lower prices to generate liquidity.
• Selective buyers creating shortages of excellent-cut (3X, none) diamonds, but prices of lower-quality goods softening due to excess supply.
• Rough trading cautious as profit margins remain tight despite rough-price reductions at De Beers sight.
• Far East trading quiet during Chinese New Year.
• Slow start to Hong Kong show, but optimistic Far East buyers are restocking inventory after Chinese New Year.
• Dealers hoping show will stimulate better trading after sluggish Jan./Feb.

March

• Diamonds between 0.70 ct. and 1.99 ct. moving well, but large stones weak.
• Demand selective and inventory levels high, with buyers insisting on deep discounts for goods under 0.50 ct.
• Shortages developing for better qualities as India cuts back production.
• Trade cautious after slow Hong Kong show.
• Far East consumer outlook improving as US and China approach trade deal.
• Miners bracing for tough year as first-quarter sales decline an estimated 30%.
• Rough market quiet, with deep concerns about manufacturing profitability.
• GIA to introduce polished-diamond country-of-origin report.
• HRD adopts natural-diamond grading language for synthetics reports.
• Fugitive jeweler Nirav Modi arrested in London.
• Eurostar Diamond Traders close to bankruptcy amid $500M debts.
• Baselworld announces price cuts and changes to diamond section, after smaller 2019 show.

April

• Dealers under pressure as polished prices continue to soften.
• Indian cutters lacking liquidity; reducing production and seeking to offload excess 0.30 to 0.50 ct. inventory.
• Steady demand for 1 ct. diamonds supporting the market.
• Manufacturers hoping lower rough sales will ease liquidity concerns amid reports De Beers reducing 2019 supply.
• Chow Tai Fook and Luk Fook signal slowdown during Chinese New Year, with decline in gem-set jewelry sales.
• LVMH upbeat on luxury market, with 1Q jewelry and watch sales +9% to $1.2B.
• US considers regulations requiring source-of-origin disclosure.
• De Beers launches provenance program for “Diamonds from DTC.”
• GIA rebrands synthetics grading report as lab-grown.
• Tiffany and Forevermark shift marketing focus to bridal.
• Graff unveils world’s largest square emerald diamond: a 302.37 ct., D stone cut from 1,109 ct. Lesedi La Rona.

May

• Market sentiment weak amid slow orders, tight liquidity and declining prices.
• Good demand for 0.70 to 1.99 ct., G-J, VS-SI, RapSpec A3+; other categories weak.
• Large-stone dealers cautious amid high-end slowdown.
• Opportunities for high-end buyers after 3 to 5 ct. prices drop significantly.
• Polished suppliers left with large volumes and low profit margins.
• Dealers doing better than manufacturers.
• Jewelers taking more on memo and using tech in their stores to tap online supply and improve consumer buying experience.
• Suppliers preparing for Las Vegas shows, hoping new JCK venue and steady US retail market will stimulate diamond trading.
• Rough trading cautious with high auction prices and tight manufacturing profits.
• De Beers maintains stable prices at $415M sight; low Indian liquidity impacting demand.
• India’s customs tightens disclosure rules for rough imports.
• Petra sells 425 ct., D, type II rough to Stargems and Choron for $15M.
• US retail positive, with fine jewelry a top category at J.C. Penney and Macy’s.
• Signet debuts synthetic diamonds on James Allen website.
• Industry mourns the passing of Leo Schachter and Sam Abrams.

June

• Sentiment weak amid ongoing liquidity concerns and softening polished prices.
• Polished production reduced by estimated 30% in 2019 due to high inventory, sluggish demand and tight manufacturing profits.
• Slow trading at JCK Las Vegas show highlights middle-market liquidity and profitability challenges.
• Jewelry wholesalers did better, reflecting steady US market.
• Suppliers using technology and sourcing programs to demonstrate added value as jewelers reduce inventory purchases.
• De Beers sales slump as manufacturers reduce cutting operations.
• Rough market cautious despite reported 4% to 8% price cut on small rough during De Beers sight. Price cuts not enough to reboot the market.
• Weak yuan and trade war reduce tourist shopping, but outlook for Chinese local demand improves as luxury consumers shift to domestic spending.
• Quiet Hong Kong fair highlights show fatigue and cautious Far East demand.
• Tara Jewels files bankruptcy.
• French billionaire Patrick Drahi acquires Sotheby’s for $3.7B.
• RapNet members vote no to lab-grown listings and price list.
• Swarovski plans move into natural diamonds.

July

• Polished suppliers cautious for 2H amid trade-war uncertainty, weak dealer demand and tight manufacturing profit.
• Manufacturers maintaining low production and buying polished rather than rough, as they need to focus on profitability instead of turnover.
• Buyers taking advantage of suppliers’ need for cash and pushing for discounts.
• ABN Amro restricts rough-sector lending out of concern for lack of profitability.
• US supporting the trade with steady retail sales.
• Producers raising rough inventory as 1H sales slump and mine production remains steady.
• De Beers allows additional deferrals at July sight.
• Tariff tensions and political protests impact Hong Kong luxury spending.
• India keeps duty on polished diamonds at uncompetitive 8.25%; introduces separate import code for lab-grown rough diamonds to differentiate natural from synthetic diamonds.

August

• Low expectations for Sep. Hong Kong show due to slowdown in Chinese demand and escalation of political protests.
• Belgian, Indian and Israeli trade bodies call to postpone fair amid uncertainties about buyer attendance.
• Polished-inventory levels starting to decline as manufacturers cut production and rough buying.
• Small Aug. sight as De Beers lets sightholders reject 50% of goods.
• Alrosa slashes 2019 sales forecast.
• Mid-scale miners struggle to stay afloat in current weak market.
• US jewelry sales compensating for weakness elsewhere, but retailers holding less inventory.
• Strong jewelry sales at Macy’s and J.C. Penney highlight discounting and promotional retail environment.
• US jewelers likely to raise local manufacturing as 10% tariff on diamond and jewelry imports from China takes effect Sep. 1.
• New levy to impact jewelers more than diamantaires.
• Devalued yuan adds price pressure for Chinese diamond importers.
• Tiffany expands into India, with Delhi store to open in 2H.

September

• Polished-inventory levels reduced, but still higher than previous years.
• Steady demand for 0.30 to 1.99 ct., G-I, SI-I1, RapSpec A3+ diamonds, and reduced supply supporting price levels.
• 3 ct. and larger, D-F, VVS+ weak.
• Hong Kong show brings fewer visitors, but better-than-expected trading. Serious buyers attending.
• Fair signals shift to lower price points.
• Chinese dealers and consumers focused on domestic spending, with cautious Far East demand affecting sentiment.
• De Beers offers 30% buybacks at Sep. sight.
• Manufacturing profit margins tight despite limited rough supply.
• Rapaport calls for $1B industry-wide marketing campaign for engagement rings, including $500M matching funds from mining companies.

October

• Polished trading improving as jewelers prepare holiday inventory. US demand supporting the market.
• Shortages in RapSpec A3+, nonfluorescent goods as manufacturers maintain low production.
• Specific demand creating high inventory of less popular qualities.
• Manufacturing slowing before Diwali with factories closing until late November. Trading slow at Bharat Diamond Week.
• De Beers inventory up in 3Q due to weak rough demand and despite production decline. Miner predicts elevated stock levels will last until 2020.
• Hong Kong retail sales slump as protests escalate during Oct. 1 Golden Week. 
• Brands shifting high-ticket items from Hong Kong to Shanghai stores.
• LVMH makes $14.5B offer to acquire Tiffany & Co.
• Richemont acquires Italian jeweler Buccellati.
• Sotheby’s HK sells $38M, with 10.64 ct., purplish-pink, IF diamond selling for $19.9M ($1.9M/ct.); auction also reflected sluggish big-stone market as 80.88 ct., D, FL diamond fails to sell.
• De Beers launching Lightbox at Bloomingdale’s and Reeds Jewelers; Signet introduces synthetic diamonds at Kay and Jared.
• David Kellie to succeed Jean-Marc Lieberherr as CEO of Diamond Producers Association.

November

• Polished market stable and showing rise in demand for 0.30 to 0.50 ct.
• Reduced manufacturing has led to shortages of top-quality RapSpec A3+ goods.
• Optimistic outlook for season as stock market rallies despite Trump impeachment trial and trade war.
• Macy’s and J.C. Penney highlight strong 3Q jewelry performance.
• Rough trading steady after De Beers reduces rough prices 5%-7% at Nov. sight.
• Manufacturers raising production after Diwali break amid shortages of better-quality RapSpec A3+ diamonds.
• Retail outlook optimistic as Dow hits record.
• Jewelers taking more on memo, presenting good opportunity for New York dealer market.
• LVMH $16.2B Tiffany buyout demonstrates confidence in luxury jewelry sector.
• Potential US-China trade deal boosts expectations for Chinese New Year, but ongoing unrest dampens Hong Kong luxury market.
• Peter Meeus and IGI submit competing bids to acquire HRD Antwerp.

December

• Diamantaires satisfied with Dec. orders after tough year.
• Mastercard reports holiday jewelry sales +1.8%, driven by +8.8% growth in e-commerce.
• Tiffany & Co. holiday revenue up 1% to 3%, with strength in China and improvement in Europe and America.
• Mall traffic down but more people buying.
• Stores focused on creating unique customer experience.
• Shortages and holiday demand supporting diamond prices, especially for diamonds below 1 ct.
• Consumers shifting to lower price points.
• Diamantaires preparing for post-season demand, but manufacturers cautious about raising factory production.
• Chinese demand driving polished market ahead of Jan. 25 lunar festival as US and China edge toward trade deal.
• Rough market stable following $425M Dec. sight. De Beers returns to regular sales policy, ending flexibility that allowed higher buybacks or deferrals.
• Alrosa positions itself in China with WeChat blockchain program and unveils plan to integrate Kristall polishing units.
• De Beers lowers 2020 production plan as Anglo American reports 2019 inventory grew by $500M.
• Bain forecasts market recovery only in 2021.
• De Beers issues guidelines for sightholders selling synthetics.
• ABN Amro tightens credit conditions, citing reduced midstream requirements due to streamlined production and sales efficiency.
• Sarine and Serge Couvreur join race to buy HRD Antwerp; IGI pulls out.

Image: A large rough diamond at De Beers’ Global Sightholder Sales operation in Botswana. (Ben Perry/Armoury Films/De Beers)
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Tags: Polished Diamonds, Rapaport News, Rapaport Weekly Market Comment, Rough Diamonds
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