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Industry News: Polished Prices Dip But Production Set To Increase; GIA, De Beers Discuss Synthetics February 11, 2015 (0 comments)
New York, NY—Polished diamond demand improved in January but prices remain under pressure, according to the latest figures from Rapaport. At the same time a new report from global mining analyst Paul Zimnisky says global rough diamond production is estimated to hit over 135 million carats in 2015.
Jewelers are resisting buying large quantities of diamonds, as inventory levels remain higher than usual for this time of year, says Rapaport. The RapNet Diamond Index (RAPI) for one-carat laboratory-graded diamonds fell 0.4% in January. RAPI for 0.30-carat diamonds dropped by 0.9%, while RAPI for 0.50-carat diamonds declined 1%. RAPI for 3-carat diamonds was flat during the month.
The declines in January, though small, extend the downtrend that began in April 2014. Polished diamond prices remain significantly below levels recorded one year ago, with RAPI for one-carat diamonds down 10.2% year on 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% since returning from the Diwali break in November.
Rough demand remains weak even though De Beers reduced its rough prices by an average 4% at January’s estimated $450 million sight. Sightholders deferred 25% of their purchases and are anticipated to continue to reject goods in February, as De Beers’ price cuts were not 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, 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% year on year in December and full-year sales were about flat at $69.19 billion, according to U.S. government data. Far East demand is soft, so the diamond market is looking to the U.S. for support. Read the full report, "A Slow Start," at www.diamonds.net/report or email specialreports@diamonds.net.
But lack of demand for rough isn’t stopping producers from mining it, according to a new report from global mining analyst Paul Zimnisky. Based on an analysis of the world's 54 largest diamond mines, global diamond production will reach an estimated 135.5 million carats in 2015, vs. an estimated 131.1 million carats produced in 2014. In U.S. dollars, 2015 production is estimated at $14.0 billion, compared to an estimated $13.8 billion in 2014.
Zimnisky’s analysis forecasts a 2% decrease in per-carat rough prices this year over 2014, due to liquidity concerns, a slower-growing Chinese economy, and a strong U.S. dollar, though that could also benefit miners who account for operating expenses in dollars. Lower oil prices also should help miners, as much of their equipment is powered by diesel.
Zimnisky also estimates synthetic diamond production to hit about one million carats of marketable, gem-quality stones. At present, this equals approximately 1% or less of mined gem-quality stones, and while it’s been about two years since the first 1.0 ct. + VVS colorless stone was produced, to date the economics for producing high-quality stones in commercially viable quantities are not favorable. But, he warns, this will change as technology progresses.
Finally, the subject of synthetic diamonds will be the focus of a presentation by both GIA and De Beers, at GIA GemFest Basel, Sunday, March 22 from 5:00 to 6:00 p.m. at the Montreal Auditorium, Congress Center Basel. Reserve your spot here.