China demand makes diamond too pricey

Source: The Economic Times

Author: Sutanuka Ghosal

KOLKATA: India’s expanding middle class may now have to spend more to own a piece of diamond-studded jewellery. Prices of smaller diamonds (10 cents and 6 cents) have gone up due to a surge in Chinese demand.

Vipul Shah, chairman, Gem and Jewellery Export Promotion Council, told ET: “Prices of polished small diamonds (10 cents and 6 cents) have gone up 5% as demand for these categories has risen in China, Hong Kong and the other Asia Pacific regions. But demand for larger diamonds, known as sawn diamonds, has been sluggish as the US and Europe, the major consumers, are not purchasing them in big volumes.

Prices of polished diamonds may go up further as demand is increasing in the Asia Pacific region and supplies are not enough to sustain this demand.” The annual Global Diamond Industry Report says global consumption will help the worldwide value of diamond sales surge from £10 billion in 2011 to £17 billion a year in the next seven years. This boom will be fuelled by the rising middle class in India and China.

Demand from these nations is expected to soon surpass the US consumption. Vijay Jain, CEO, Orra, said: “Gold has witnessed a dramatic rise in price. But diamond has not seen such a huge appreciation . Though there is volatility in diamond prices, it is not as significant as gold. Therefore , the price hike in diamond is more acceptable to the consumer as it has been a steady rise.”

Bachhraj Bamalwa, past chairman of All India Gem and Jewellery Trade Federation, said: “Jewellers will now try to offload older stocks of diamond-studded jewellery before they introduce jewellery with new prices. By that time, consumers will get to know that prices have gone up and they will get prepared to shell out more.” Vinod Hayagriv, MD of C Krishniah Chetty and Sons, said: “If demand comes down, prices of diamond will fall. But that is not going to happen in near future.”

Companies are now looking at introducing products that are affordable to customers and yet have the look of an original high-quality diamond. The Orra CEO said the company has launched the Aquila range of diamond studded jewellery that have the look and feel of a one-carat diamond (100 cents make a carat). “Such items are being bought by aspiring middle class youngsters.

The industry will have to come up with innovative products at a time when diamond prices are rising. This has happened in gold too. Most jewellers have come up with lightweight gold jewellery with a heavy look.”

Industry Analysis: Asian Trade Shows Report Good Traffic, Price Resistance

This article is published courtesy of  Gemological Institute of America

Author: Russell Shor,   Senior Industry Analyst

Intellectual property: GIA

Reports from trade shows in Bangkok (Feb. 26-March 2) and Hong Kong (March 5-9) were generally positive, citing strong traffic. Price resistance for diamonds and colored gems was also quite strong. By the close of the latter show, however, buyers accepted diamond prices that were some 20% above last year’s show. This gives some relief to manufacturers squeezed between rising rough prices and static prices for polished goods.

 

In Hong Kong, Alrosa, the agency that markets Russia’s diamond production, held a tender auction of 145 polished stones — several of more than 10 carats — that was expected to total $8 million.

 

At the Jewelers of America Show in New York (Feb. 28-March 2), exhibitors reported light traffic. Serious buyers did show up, but they were cautious and bought primarily to replenish post-holiday season inventories.

 

DIAMONDS: The speculative spikes in rough diamond prices appear to have eased following sales of some $2 billion worth of goods into the market during the first two months of this year. The 7% to 9% price increases that the De Beers Diamond Trading Company imposed in February were also quickly absorbed. Secondary sellers, however, did not tack on their own increases as they had for the previous nine months.

 

This, plus steadily recovering demand and firming prices for polished diamonds, has given the diamond industry hope that rough and polished markets are stabilizing.

 

Rough prices are higher now than they were before the economic crisis; the increases stem from renewed credit lines, particularly in India, and perceived shortages of rough. Last year, rough sales totaled $5.5 billion to $6 billion, half of 2008 levels.

 

COLORED GEMS: Gem Fields, the London-based colored stone mining company, intends to take its time in evaluating the 6,225 ct emerald its Zambian operation unearthed last month. The company’s chief executive did say, however, that preliminary indications are that “it should yield a number of cut gems of significant size.”

 

MACRO: Favorable weather and improving consumer sentiment helped push chain store sales to their largest gain since July 2007. Sales rose 3.4% the first week in March over the corresponding week last year, according to the International Council of Shopping Centers (ICSC) and Goldman Sachs. Major store sales for the first week of March were also up 2.9% from the previous week.

 

Michael Niemira, ICSC’s director of research and chief economist, predicted that with this strong start, March sales would increase by 2.5% to 3.5%.

 

— Russell Shor

    Senior Industry Analyst