Between the 1st January 2017 and 1st November 2017, prices for 0.30 carat polished diamond declined by 1.2% while 0.50 carats dropped by 18.1% and fell by 20.7% over the past 12 months
US research company, Rapaport, has raised concerns that as a result of increasing supply of polished diamonds in the global market, prices for diamonds are declining, a development which could negatively affect revenues for diamond exporting countries.
An updated price index released by the company last week shows that between 1st January 2017 and 1st November 2017, prices for 0.30 carat polished diamond declined by 1.2% while 0.50 carats dropped by 18.1% and fell by 20.7% over the past 12 months. The index shows that 1-carat diamonds dropped by 4.7% in the first 10 months of the year and fell 5.4% over the past 12 months. 3-carat is the only category which recorded increase in prices, after rising by 4.5% between 1st January 2017 and 1st November 2017 and rose by 4.7 percent in the past 12 months. “One should not expect polished-diamond prices to rise significantly, as manufacturers and dealers need to reduce their inflated stock,” states Rapaport.
In its November 2017 monthly update on the global market for diamonds, the research entity stated that the midstream sector, manufacturers and dealers, have an inflated volume of polished diamonds and the supply of diamonds in the sector have been increasing since the beginning of this year. “The rise in inventory comes during a year of sluggish polished sales alongside an increase in rough production and supply. Jewellery retailers are maintaining tight inventory controls and limiting their buying to a select range of goods, which is exerting additional pressure on the manufacturing industry and dealers,” stated the company.
Rapaport stated that while the accumulation of inventory is typical for the third quarter, Sarine Technologies one of the biggest global diamond polishing companies indicated that the overstocking was higher than average this year. “This echoed sentiment expressed in last month’s Rapaport Monthly Report, which noted that polished prices had come under pressure during the three-month period.”
Rapaport Senior Analyst Avi Krawitz indicated that the industry appears oversaturated with polished diamonds and traders. “For that reason, bankers at the Dubai Diamond Conference during the month of October predicted more bankruptcies in the midstream. There are simply too many people chasing the market, while demand has narrowed to a select range of goods. Inventory levels remain high and the bulk of that stock is in goods that are difficult to move.”
Giving an update on the rough diamond market the Analyst indicated that the market is also experiencing difficult trading with the latest data showing that rough demand slowed in October and the sector is experiencing oversupply and declining prices. According to Krawitz, rough diamonds prices have been declining with latest data showing that they have declined by an average of 3% to 5% since the beginning of the year. “Alrosa reported a 3% drop year on year to an average price of $114 per carat during the third quarter, while Petra Diamonds’ prices fell 13% to $110 per carat. We estimate that De Beers experienced an even sharper drop during the third quarter,” he said.
It has emerged that the combined production of rough diamonds from De Beers, Alrosa, Rio Tinto, and Petra Diamonds rose to its highest quarterly level in almost a decade during the third quarter and full-year global production for 2017 is projected to be 10% higher than last year.
According to Rapaport November 2017 monthly update in global trading of diamonds, the retail market which provides market for rough and polished diamonds sector is also experiencing difficult trading conditions, as the US jewellery sector continues to contract, with more businesses closing than opening. “During the quarter, 228 businesses discontinued operations, in addition to 416 which closed last year. However, only 40 new jewelry businesses opened this year while 111 opened in 2016. The trend will likely continue for the foreseeable future,” states Rapaport.
Rapaport stated that diamond traders’ focus now rests squarely on the consumer market during the holiday season, officially beginning in the US on Thanksgiving weekend on 23rd November but explained that if the diamond market seeks long-term growth in prices, it will need sustained consumer demand beyond the holiday season to help alleviate the midstream’s inventory risk and keep polished prices rising even after the first quarter.”