Polished diamond prices declined in August as trading slowed and liquidity tightened in the manufacturing centers. Buyers avoided making large inventory purchases in advance of the September Hong Kong Jewellery and Gem Fair, yet suppliers are maintaining low expectations for the show.
According to the Rapaport Monthly Report – September 2014: “Large Inventory, Tight Liquidity,” polished markets were quiet with Belgian and Israeli dealers taking vacation through most of August. There was steady U.S. demand for commercial-quality, SI-I2 clarity diamonds. Demand for Gemological Institute of America (GIA) dossiers slowed from previous months but remained fairly robust. The GIA improved its turnaround time of grading diamonds, which has contributed to higher inventory levels ahead of the holiday season.
Rough trading slowed and prices softened on the secondary market in August following the relatively big De Beers sight. Mining companies posted significant profit growth in the first half of 2014 due to high rough prices and a larger volume of supply. In addition to large polished inventories, manufacturers currently have significant quantities of rough inventory, which has further pressured their liquidity. Rough buying is expected to slow further in September.
Diamond manufacturers have low expectations for next week’s Hong Kong show. Buyers are pushing for higher discounts as suppliers seek to raise liquidity levels amid concerns about reduced bank credit. Cash buyers are getting significant discounts. Dealers and manufacturers are hoping the show will help to ease their liquidity pressures and deplete some excess inventory, while they attempt to reverse the downtrend in polished prices that has been evident in the past few months.
