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Not Your Typical Diamond Market

Wishing you a great week ahead as we approach the end of the month. Can you believe that? And I’m still hearing “Happy New Year” greetings here and there. We’re deep in it at this stage; 2025 is well under way.

 

Then again, this is an opportunity to wish those who celebrate, Happy Chinese New Year, with the ‘Year of the Wood Snake’ beginning on Wednesday. Now, I don’t know what a wood snake is, and I’m no fan of snakes, period, but I read that those born in the year of the snake have keen insight, extraordinary intelligence, and are seen as resourceful and determined. Sounds like a good combo to me. So may this Lunar Festival instill those useful traits in all of us.

 

Let me also pause here to say how touched I was to receive all the positive messages about The Diamond Press following its launch last week. I truly feel blessed that so many are cheering for me, believe I can add value, and consider The Diamond Press to be the right vehicle to build community and engage in critical analysis about the diamond market. I’m excited about what lies ahead.

 

Right, let’s get to the pressing issues that matter this week.

 

Cautious rough trade

 

Several developments in the rough market came to our attention.

 

>>> The De Beers sight that took place last week in Gaborone signaled weak sentiment among manufacturers and little appetite to buy rough.

 

What happened?

De Beers left prices unchanged, contrary to some expectation that the company would make reductions again as it did in December. Rather, it allowed for higher rejections, and there were a lot of those at what is believed to be a small sight.   

 

Why it matters:

The January sight should be a large sale considering the first quarter is typically a busier period for the trade. Jewelers tend to become active in the polished market as they need to replenish the inventory they sold during the holiday season. Manufacturers therefore usually dip into the rough market in January so they can prepare their supply in anticipation of those new orders.     

 

What it tells us:

This is not your typical diamond market. Polished trading has not yet picked up as one expects it to in January, despite reports of a decent US holiday season among independent jewelers. There remains concern about high polished inventory levels, which will put additional pressure on prices if demand remains sluggish in the coming months. Manufacturers are therefore exerting caution in their rough buying.

 

However, at some point De Beers will need to stimulate sales and find ways to reduce its inventory, which is currently at an unprecedented high. Keep an eye on De Beers production levels, and consider what that might mean for Botswana.

 

Elsewhere in rough

 

>>> Petra Diamonds found a buyer for its Williamson mine in Tanzania, as it agreed to sell its 75% stake in the operation to a local company for $16 million. The deal should give a bit of assurance to other miners that there is at least some investor interest in diamond operations in this environment.

 

>>> The mining sector endured a tough market in 2024: Petra Diamonds said its sales fell 22% to $146 million and Mountain Province Diamonds reported revenue declined 20% to $195 million for the year.

 

Tax free India?

 

>>> India’s Department of Commerce introduced a program to enhance the country’s competitiveness in the polished diamond market. 

 

The details:

The scheme enables the duty-free import of small diamonds below 0.25-carat, but only up to an amount equal to 5% of a company's average annual exports over the previous three years, or $15 million. Larger stones, and the rest of a company’s small polished, remain subject to a 5% duty. The initiative is a response to beneficiation policies in producer countries requiring manufacturers to cut and polish their rough supply locally, among other factors.

 

The significance:

The 5% duty has prevented growth in India’s polished trade and influenced local suppliers to shift a portion of their business abroad. Dubai has been a major beneficiary of this. Consider a company with manufacturing in multiple beneficiation centers as well as India, which exports most of its supply to the US and China. That company needs a central location to prepare its assortments before shipping the goods to clients. Bringing the beneficiated polished to India would add 5% to the cost, so they facilitate that activity elsewhere.

 

The new scheme is an acknowledgement by the government that the duty has cost the Indian trade business opportunities and employment prospects. Expect the local industry to lobby for further measures, and maybe even expect an announcement in Saturday’s budget speech.

  

China still weak

 

>>> Let’s hope the Chinese New Year signals a change of fortunes for the diamond industry in mainland China and Hong Kong-Macau. We got a reminder of just how tough last year was from three major jewelers in the region.

 

Retail sales at Chow Tai Fook dropped 14% year on year in the fiscal third quarter ending December 31. Same-store sales of gem-set, platinum and K-gold jewelry declined 20% in China but grew 34% in Hong Kong-Macau, the jeweler noted. Luk Fook reported revenue from across its self-operated stores and e-commerce platforms fell 9% year on year during the quarter. Diamond sales slumped 46%. That’s after Richemont said its sales in China dropped 18% in 2024, suggesting the crunch has affected the luxury consumer too.  

 

The impact:

India has overtaken China as the second largest market for diamond jewelry behind the US. While we remain bullish about India’s growth story, the change in rankings was likely more due to the slump in China than the increase in India. That suggests a net negative for the global diamond market. Either way, the industry continues to feel the absence of Chinese buyers, thus adding another layer to the slowdown in polished trading.

 

From the blog:

 

>>> Here’s my video analysis about Richemont’s position in the market: Will Richemont Save the Diamond Industry?

 

>>> National Jeweler again began the year with its “My Next Question” webinar exploring prospects for the fine jewelry market, with great insights from the panel. See: Fine Jewelry Predictions for 2025.

 

Coming up:

 

  • LVMH 2024 trading update: January 28

  • Conference Board US Consumer Confidence Survey: January 28

  • Chinese New Year: January 29

  • Gem Diamonds trading update: January 29

  • India’s Union Budget 2025 Presentation: February 1


Pic of the week:

Image: Botswana President Duma Boko (right) speaks at the World Economic Forum (WEF) in Davos, Switzerland on Thursday, January 23. The president told Reuters he expects the marketing and mining license agreements between his government and De Beers to be finalized in the coming days. (Image credit: Facebook.com/BWPresidency)

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