Diamond prices fell in July as market sentiment declined to levels not seen since the 2008 downturn.
Manufacturers rejected large quantities of rough supply as trading and manufacturing activity decreased. There is a significant gap between rough and polished prices, and sightholders are preparing to turn down unprofitable rough again in August.
Meanwhile, polished prices fell as manufacturers felt pressure to reduce inventory levels amid sluggish Chinese demand, and stable but cautious U.S. demand.
The RapNet Diamond Index (RAPI) for 1-carat laboratory-graded diamonds fell 2.5 percent during July. RAPI for 0.30-carat diamonds declined 6.3 percent and RAPI for 0.50-carat diamonds dropped 4.7 percent.
The RAPI for 3-carat diamonds decreased 1.7 percent. During the first seven months of the year, RAPI for 1-carat diamonds fell by 2.8 percent, and was down 14.1 percent from one year earlier on August 1.
According to the Rapaport Monthly Report – August 2015, polished inventory levels remain high. However, there are shortages in select goods due to a significant decline in manufacturing. Cutters, who usually make large-scale rough purchases in July and August in preparation for the Christmas season, are refraining from doing so this year.
De Beers will allow sightholders to defer up to 75 percent of their August purchases after sightholders rejected an estimated 65 percent of goods at the July sight. The sight closed with an estimated value of $200 million, a seven-year low for an individual sight. De Beers and ALROSA sales are expected to decline sharply in the second half of the year after both reported a tough first half.
Manufacturers are content to stay out of the rough market as they try to diminish their large polished inventory. Jewelers will be getting their supply for the holiday season mostly from existing excess polished inventory, rather than from rough, as there is almost no new rough entering the system.
It will take more than low supply to stimulate rough trading and diamond market activity. Frustrated manufacturers are making their rough buying decisions based on declining polished valuations rather than long-term supply concerns. Rough prices must drop significantly to enable manufacturing – and mining sector – profit growth, and lift the general market from its current crisis.
