Jewelers are resisting buying large quantities of diamonds as inventory levels remain higher than usual for this time of year.
Polished diamond demand improved in January but prices remained under pressure.
Expectations are relatively low for jewelry sales during the Chinese New Year after a disappointing Christmas shopping season, according to Diamonds.net. Dealers are waiting to see if the upcoming Chinese New Year Golden Week will help boost demand and prices after a slow start to the year.
The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds fell 0.4 percent in January. RAPI for 0.30-carat diamonds dropped by 0.9 percent, while RAPI for 0.50-carat diamonds declined 1 percent. RAPI for 3-carat diamonds was flat during the month.
The declines in January extended the downtrend that started in April 2014. Polished diamond prices remain significantly below levels recorded one year ago with RAPI for 1-carat diamonds down 10.2 percent year to year.
According to the Rapaport Monthly Report – February 2015, “A Slow Start,” sentiment is weak in the diamond trading centers. Dealers are lacking in confidence and suppliers are anxious to diminish inventory levels. India-based diamond manufacturers have reduced their polished production by an estimated 20-30 percent since returning from the Diwali break in November.
Rough demand remains weak even though De Beers reduced its rough prices by an average of 4 percent at January’s estimated $450 million sight. Sightholders deferred 25 percent of their purchases and are anticipated to continue to reject goods in February as De Beers' price cuts were not regarded as being sufficient.
De Beers is expected to maintain fairly stable rough prices in the coming months putting pressure on sightholders who will be required to purchase their deferred supply in March, which is the final sight of the current De Beers contract. This will place further pressure on market liquidity and profit margins given relatively weak polished demand.
“Rough prices must come down to the extent that diamond manufacturing is once again a profitable activity. Diamond prices can only be sustained and increased by raising demand, rather than limiting supply,” said Martin Rapaport, chairman of the Rapaport Group.
U.S. jewelry sales fell by 1.5 percent year on year in December and full-year sales were about flat at $69.2 billion, according to U.S government data. Far East diamond buying is conservative ahead of the Chinese New Year Golden Week in mid-February after China’s economy grew 7.4 percent in the fourth quarter of 2014 – its slowest pace in 24 years. China’s money transfer controls and limitations on luxury purchases are further fueling caution in the high-end jewelry market.
The diamond market is therefore looking to the U.S. for support but hoping that trading will pick up after Golden Week, following a slow start to 2015.
