2011 Diamond Review

Diamond prices rose significantly in 2011. Growth was driven by strong gains in the first half of the year even as political and economic uncertainties continued. However, the high levels reached in July proved unsustainable as global factors and liquidity challenges caught up with the industry.
The result was that overall, 2011 was a volatile year politically and economically which was reflected in equity and commodities markets, as well as in diamond prices. For the full year, the RapNet Diamond Index (RAPI) for 1 carat certified diamonds rose 19 percent after having increased by 34 percent in the first half of the year. An in-depth review of prices will be published shortly in the upcoming Rapaport Diamond Price Statistics Annual Report 2011 in the January edition of Rapaport Magazine.

The data is telling. And so are some of the factors that influenced the market during the year. The following is a collection of the key issues that impacted the market each month, as reported in Rapaport’s weekly global comments.

While these should not be used as a means to forecast the year ahead, they provide an important reference point by which current trading can be measured. For while the coming year will no doubt bring its own set of surprises, the events of 2011 will surely remain relevant and worth remembering.

January

· 2010 U.S. holiday season meets expectations.
· High rough prices relative to polished and high rough premiums.
· Fine-to-mid quality 0.5-1 ct. polished and cheap Indian goods in short supply with strong demand for melee goods.
· Polished prices firm with shortages in stars and smalls of SI and lower qualities, and 1ct+, H-J, VS-SI and larger sizes. Demand for 2 ct. improves.

February

· Belgian polished dealers meet price resistance at Antwerp fair.
· DTC price hike of 7% but premiums remain high.
· Indian polished market strong with shortages in smalls up to 0.5 ct. helping to firm prices.
· Polished suppliers try to raise prices as dealer demand strengthens.

March

· Commodity prices rise on increasing Middle East uncertainty.
· Hong Kong show indicates shift to seller’s market with very strong buying activity.
· Investment demand builds as Middle-East instability spurs demand for large fine quality D-IF and other high quality investment diamonds.
· De Beers reports unprecedented rough demand at recent Diamdel auctions.
· Financial markets slump with Japan quake.
· Melee prices surge with significant increases for top quality, very small sizes (0.005-0.03 ct. stars), due to powerful demand from developing markets for watches and branded jewelry.
· DTC price hike of about 10%.
· Concerns about speculation as rough inventories rise but manufacturing lags resulting in polished shortages.

April

· Strong rough demand continues despite high prices.
· Polished markets stable.
· Gold surges to record high, silver to 31-year high as sovereign debt concern in Europe and U.S. inflation fears hit currency markets.
· Rising investment demand for top quality diamonds as Middle-East political instability and global economic uncertainties persist.
· Large U.S. retailers significantly increase inventory purchases.

May

· DTC raises prices about 3% while premiums on Indian rough cools.
· Polished shortages linger as Indian diamond cutting slows during summer vacations.
· Strong polished demand as expectations rise for JCK Vegas show.
· Manufacturing profits under pressure as rough price increases continue.
· Goods are tight and seller’s market prevails as U.S. retailers report strong 1Q.

June

· JCK Las Vegas Show well attended with positive mood.
· Seller’s market prevails. U.S. retailers begin to pay higher prices as Far East competition for scarce goods heats up.
· Rough markets overheat with polished prices firming rapidly. Indian sellers hold back goods until they get replacement cost.
· Shortages develop due to strong Indian, Chinese and Far East buying and rising demand from U.S. and European jewelry manufacturers.
· DTC raises prices on better-quality rough by about 12%.
· Rough trading strong with high-teen premiums for Indian DTC goods as BHP Billiton prices rise about 10%-15%.
· U.S. caution grows as Federal Reserve ends QE2 financial stimulus program.
· Trading centers steady. Far East markets strong but Hong Kong show fails to meet supplier expectations with reports that buyers are resisting higher prices.

July

· Trading slows slightly as Far East buyers avoid large inventory purchases in summer months.
· Gold hits new record ($1,595.60/oz) as dollar weakens amid U.S. and European debt concerns.
· Polished trading quiet but prices remain firm. Strong demand for very small, G+, VVS+ diamonds from branded high-end watch manufacturers.
· Rough prices continue to rise as large dealers hold back inventories.
· De Beers raises rough prices by an average of 10% with very large DTC July sight.
· Some rough dealers still hoarding goods in anticipation of future price hikes despite forecasts for stable 3Q.
· Trading centers quiet as summer vacations approach in Belgium and Israel.

August

· Polished prices lag behind rough increases as Indian market liquidity becomes problematic.
· Financial turmoil shakes confidence in consumer markets.
· India show fails to meet expectations as buyers demand lower prices due to financial uncertainty.
· Markets turn cautious as rough prices soften in response to tighter credit and uncertain economic conditions.
· De Beers rough sells at low premiums, and even discounts.
· Polished prices soften. Buyers expect lower prices but may be disappointed as Far East consumers expected to continue buying diamonds in spite of U.S. slowdown.
· Global economic power shifting to Far East.
· Violent equity market swings shake confidence as gold surges to $1,900 and falls to $1,700.
· Diamond markets uncertain and cautious as they should be.
· Rough falls with BHP tender prices down 15%-20% in spite of De Beers ill-timed price increase.
· Indian dealers no longer able to drive prices higher, but Hong Kong and other wealthy markets expected to stabilize polished diamond prices based on continued luxury demand and increasing investment in hard assets.

September

· Trading slow with buyers avoiding large purchases as diamond markets seek stable price levels.
· Rough continues to fall in dealer markets with elimination of premiums and some discounting of mining company prices.
· Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices.
· Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices.
· Buyer’s market anticipated as Indian suppliers adjust prices to meet their liquidity needs.
· U.S. retail sales stall as consumers cut spending amid growing economic turmoil.
· Hong Kong show slow but better than expected. Decent Chinese demand with buyers insisting on lower prices.
· Cash strapped Indian suppliers discount while others struggle to hold prices firm.
· Slow polished trading as economic uncertainty fuels caution in diamond markets.
· Weak rough market with buyers asking for deep discounts.
· Cutters expected to increase manufacturing as rough availability improves due to decline in speculation.

October

· Trading centers quiet as market remains cautious about 4Q prospects.
· Strong gold demand drives jewelry sales during China’s Golden Week.
· Polished trading slow, rough trading weak with serious discounting.
· Trading centers quiet over Jewish holidays with Indian markets cautious ahead of Diwali festival.
· Indian liquidity crisis remains difficult with significant increase in discount levels.
· Goods available at prices 5-15% lower than two months ago with excellent buying opportunities for cash buyers.
· Trade and consumer confidence problematic.

November

· Rough and polished trading remains cautious due to tight liquidity and price uncertainties.
· DTC prices stable but assortments improve.
· Indian market quiet with weak Diwali retail sales and continued pressure for lower prices.
· Slight improvement in trading but markets still cautious as rough price uncertainties continue and polished demand remains lackluster.
· Polished output slows as rough producers reduce supply and retail inventories remain high.
· Polished markets improve but buyers avoid large purchases before holiday season.
· India market picks up with high hopes for wedding season but liquidity problems persist.
· Heavy discounting expected as holiday shopping begins on Thanksgiving weekend.
· Consumer confidence remains weak as U.S. reduces 3Q GDP growth down to 2% from 2.5%.
· Chinese demand expected to slow due to weak global economy.
· Indian rupee hits all-time low of INR52.72/$1 creating price resistance in local markets.

December

· Overall holiday shopping begins strong. Foot traffic up with bargain shoppers.
· Jewelry revenue improves but fewer pieces selling than last year.
· Polished trading stable with suppliers holding prices firm.
· Uncertainties continue in rough market.
· DTC posts 5% price decrease on select items.
· U.S. retail sales soften as post-Black Friday lull sets in.
· Diamond markets quiet with retailers expecting last minute Christmas sales to boost mediocre holiday season.
· Polished trading quiet as Belgian and U.S. dealers close for vacation.
· U.S. consumer confidence improves as retail sales expected to grow 4% in December and comScore reports online sales +15% to $35B in November/December.
· Trading centers quiet as cutters uncertain that retailers will replenish inventories in 1Q.
· Cautious Far East demand ahead of January 23 Chinese New Year.

Leave a Reply

Your email address will not be published. Required fields are marked *