Rough Cools, Polished Rises & Retail Surprises, a Break for Some Good News
December 02, 10
When the Cyber Monday figures started to come in, they were a pleasant addition to the already surprising twist to what was mostly an uneasy year. From one end of the pipeline to the other, the industry was out of sync.
Producers increased their production this year, most of them back to pre-crisis levels, moving the goods into the market. Rough diamond prices were quick to recover in mid 2009 and continued their rally in 2010, hardly slowing down regardless of what happened down stream from the rough dealing. And after all, most of the business is south of rough trading.
Long months after manufacturers realized that prices were too high, they have de-facto continued to push the prices up, benefiting few. Prices kept climbing and many agreed in quiet conversations that buyers are not making money from trading rough as much as from other practices that accompanied the trade. Among them was using bank financing for other, more profitable, dealings. In some cases, its was the resulting polished that was used in these dealings, including ‘round-tripping’, exporting the same goods two or three times for the additional financing that each export brings.
While the banks will need to address this issue in some form or another - and discussions about this are already under way - further down the pipeline prices of polished were flat due to low demand and a wide belief that retail sales would at best beat inflation and then some.
The buoyant mood among many polished diamond wholesalers, as evident by rising asking prices, hit a brick wall at the
And then it happened. It started with late yet consistent and growing demand for polished in
Retailers’ purchases were a good sign. But until consumers enter the stores, matters are very much in the air.
We wrote recently that the industry is at an impasse. It was the last few days of October, and the growing sentiment was that we won't wake up on Christmas morning with big presents in our stockings because of a combination of rising rough costs, flattish polished prices and sliding retail sales.
And then, while polished started to pick up, DTC increased prices on its rough to take advantage of the secondary market’s willingness to pay high premiums. DTC Sightholders paid without much concern, but - and here is the surprise - the secondary market, rough buyers that are not clients of the main suppliers, turned a cold shoulder to a lot of goods and resisted the increased prices, forcing a decrease in the premiums.
So the rough market cooled a little, polished prices increased modestly, retailers stocked up and - happy to complete the picture - buyers in the
Here are some facts and figures from the top of the pipeline, moving down: De Beers increased production to nearly 38 million carats this, DTC raised prices by about 4-5 percent at the last Sight and demand for fine, crystals, commercial, chips and makeable goods was low to very low resulting in limited trading and premiums declined to 3-6 percent on many items. Polished prices increased on average by about 1 percent in the past two weeks. The strong performers were 3/4, 1 and 3 carat round goods. The last increased by 2.2 percent since mid-November.
According to various retail research firms, Thanksgiving and Cyber Monday were excellent. Online jewelry sales, with a reported 17.6 percent increase in sales on Thanksgiving, increased another 60.3 percent on Cyber Monday. Stores sales may not be as good, but the gloom is gone.
This is all good news as we enter December. Rough prices ebbed, polished flowed and retail sales surged. Have a great selling season!