Beware a Supply Bottleneck

 

The positive sentiment the diamond market experienced during the past few months was a welcome change from the gloomy tone that characterized 2020. Buoyed by holiday sales that proved better than expected, the trade gained the confidence to buy again, even with activity limited mostly to online platforms.

For the first time in many years, polished suppliers struggled to fill orders due to shortages during the fourth quarter. Just a year earlier, the midstream was plagued by what seemed to be a chronic oversupply that pushed down polished prices and caused profit margins to tighten. Among the few benefits of the Covid-19 lockdowns was that manufacturers were forced to freeze rough purchases, stop production, and start depleting the excess inventory they had.

With fewer goods available, it was understandable that the rough market would wake up again in the fourth quarter. The resurgence was a remarkable one, too: The combined volume of De Beers’ and Alrosa’s rough sales rose 57% year on year to 23.9 million carats in the final three months of the year. That’s more carats in a quarter than the two have sold since the beginning of 2017 — itself an anomaly period that arguably fueled the ensuing oversupply crisis.

The positive momentum continued into the new year with reports of sizable rough sales last month. De Beers notched its largest sight in three years, while Petra Diamonds and Mountain Province continued to see good demand at their tender sales, with prices up 8%.

In the February issue of the Rapaport Research Report, we consider the question of whether the strong rough sales are a product of polished demand or of the low supply that typified the market earlier in 2020. It could be both. What’s certain is that the rough market must cool in the coming months or risk throwing the industry back into a polished-oversupply scenario.

Such an event would undo the hard work that went into restoring an equilibrium between the rough and polished markets. It would also fuel skepticism about the stated intention — by miners, manufacturers and retailers alike — of ensuring the diamond market becomes demand driven and more efficient in its operations.

Now, at the start of February 2021, the industry is at a crossroads. Manufacturers must curb their rough purchases to maintain the balance we’ve achieved in recent months and ensure a sustainable recovery. While the holiday season was relatively positive for the industry, global diamond jewelry sales have not yet returned to pre-pandemic levels and are unlikely to do so this year. For now, this means the recovery remains a supply-driven one, and the industry needs to walk the fine line between caution and its enthusiasm to do business again. 

Source: DCLA

Beware a Supply Bottleneck

 

The positive sentiment the diamond market experienced during the past few months was a welcome change from the gloomy tone that characterized 2020. Buoyed by holiday sales that proved better than expected, the trade gained the confidence to buy again, even with activity limited mostly to online platforms.

For the first time in many years, polished suppliers struggled to fill orders due to shortages during the fourth quarter. Just a year earlier, the midstream was plagued by what seemed to be a chronic oversupply that pushed down polished prices and caused profit margins to tighten. Among the few benefits of the Covid-19 lockdowns was that manufacturers were forced to freeze rough purchases, stop production, and start depleting the excess inventory they had.

With fewer goods available, it was understandable that the rough market would wake up again in the fourth quarter. The resurgence was a remarkable one, too: The combined volume of De Beers’ and Alrosa’s rough sales rose 57% year on year to 23.9 million carats in the final three months of the year. That’s more carats in a quarter than the two have sold since the beginning of 2017 — itself an anomaly period that arguably fueled the ensuing oversupply crisis.

The positive momentum continued into the new year with reports of sizable rough sales last month. De Beers notched its largest sight in three years, while Petra Diamonds and Mountain Province continued to see good demand at their tender sales, with prices up 8%.

In the February issue of the Rapaport Research Report, we consider the question of whether the strong rough sales are a product of polished demand or of the low supply that typified the market earlier in 2020. It could be both. What’s certain is that the rough market must cool in the coming months or risk throwing the industry back into a polished-oversupply scenario.

Such an event would undo the hard work that went into restoring an equilibrium between the rough and polished markets. It would also fuel skepticism about the stated intention — by miners, manufacturers and retailers alike — of ensuring the diamond market becomes demand driven and more efficient in its operations.

Now, at the start of February 2021, the industry is at a crossroads. Manufacturers must curb their rough purchases to maintain the balance we’ve achieved in recent months and ensure a sustainable recovery. While the holiday season was relatively positive for the industry, global diamond jewelry sales have not yet returned to pre-pandemic levels and are unlikely to do so this year. For now, this means the recovery remains a supply-driven one, and the industry needs to walk the fine line between caution and its enthusiasm to do business again. 

Source: DCLA

De Beers Sales Hit Three-Year High

 

De Beers’ rough-diamond sales soared to $650 million in January, its highest for any month since 2018, as manufacturers replenished inventory following the holiday season.

The total was 18% more than the $551 million the miner garnered a year earlier, and 44% above the $452 million it reported in December, De Beers said Wednesday. This was despite the company implementing a sharp increase in rough prices.

“With the midstream starting the year with low levels of rough and polished inventories, and following strong sales of diamond jewelry over the key holiday season in the US, we saw good demand for rough diamonds at the first cycle of the year as midstream customers sought to restock and to fill orders from retail businesses,” said De Beers CEO Bruce Cleaver. “Sales of rough diamonds are also being supported by expected demand ahead of Chinese New Year and Valentine’s Day.”

De Beers held the sight in its usual Botswana location, in addition to viewings in Antwerp and Dubai, as the Covid-19 pandemic has prevented many customers from traveling overseas. Its revenue figure encompasses sales that took place between January 18 and February 2, including the sight and auctions.

The January sight is usually one of the biggest of the year, especially after a positive holiday season. Even so, this year’s opening sale of the year exceeded all monthly sales going back to January 2018, when revenues came to $672 million.

De Beers raised prices by 4% to 5% at the sight in response to the improving balance between supply and demand, as reported last month by Rapaport News. Alrosa lifted its prices by 6% to 7%, with the Russian miner scheduled to publish its January sales value on February 10.

Source: DCLA

De Beers Sales Hit Three-Year High

 

De Beers’ rough-diamond sales soared to $650 million in January, its highest for any month since 2018, as manufacturers replenished inventory following the holiday season.

The total was 18% more than the $551 million the miner garnered a year earlier, and 44% above the $452 million it reported in December, De Beers said Wednesday. This was despite the company implementing a sharp increase in rough prices.

“With the midstream starting the year with low levels of rough and polished inventories, and following strong sales of diamond jewelry over the key holiday season in the US, we saw good demand for rough diamonds at the first cycle of the year as midstream customers sought to restock and to fill orders from retail businesses,” said De Beers CEO Bruce Cleaver. “Sales of rough diamonds are also being supported by expected demand ahead of Chinese New Year and Valentine’s Day.”

De Beers held the sight in its usual Botswana location, in addition to viewings in Antwerp and Dubai, as the Covid-19 pandemic has prevented many customers from traveling overseas. Its revenue figure encompasses sales that took place between January 18 and February 2, including the sight and auctions.

The January sight is usually one of the biggest of the year, especially after a positive holiday season. Even so, this year’s opening sale of the year exceeded all monthly sales going back to January 2018, when revenues came to $672 million.

De Beers raised prices by 4% to 5% at the sight in response to the improving balance between supply and demand, as reported last month by Rapaport News. Alrosa lifted its prices by 6% to 7%, with the Russian miner scheduled to publish its January sales value on February 10.

Source: DCLA

Lucapa’s Lulo diamonds fetch US$5.9 million

 

Lucapa Diamond Company and its partners have announced the results of the first diamond sale of 2021 by Sociedade Mineria Do Lulo (SML) from its Lulo alluvial mine in Angola.

The rough diamond parcel of 4,273 carats was sold for a total of US$5.9 million (A$7.7 million) or US$1,375 (A$1,793) per carat.

Lucapa MD, Stephen Wetherall comments: “As with the first sale of Mothae diamonds in 2021, prices achieved by SML at this sale continued to reflect the positive industry mood, and with sales from both operations in 2021 already totalling A$15 million, it has been a solid start to the year.”

Source: DCLA

Lucapa’s Lulo diamonds fetch US$5.9 million

 

Lucapa Diamond Company and its partners have announced the results of the first diamond sale of 2021 by Sociedade Mineria Do Lulo (SML) from its Lulo alluvial mine in Angola.

The rough diamond parcel of 4,273 carats was sold for a total of US$5.9 million (A$7.7 million) or US$1,375 (A$1,793) per carat.

Lucapa MD, Stephen Wetherall comments: “As with the first sale of Mothae diamonds in 2021, prices achieved by SML at this sale continued to reflect the positive industry mood, and with sales from both operations in 2021 already totalling A$15 million, it has been a solid start to the year.”

Source: DCLA

Tax Authorities to Return a Million Rough Diamonds from Raids

 

A million rough diamonds seized in raids by the Indian tax authorities on the scanning firm Diyora & Bhanderi are to be returned to their owners.

The company is being investigated over claims of tax evasion and the illegal sale of diamond scanning machines. Its premises in Surat were raided 10 days ago.

Gems belonging to over 800 diamond firms, which had been sent to Diyora & Bhanderi Corporation (DBC) for rough scanning, were seized, along with large quantities of cash.

The Surat income tax authorities responded on Friday to representations by the Southern Gujarat Chamber of Commerce and Industry that diamantaires should have their gems returned, as long as they can provide the proper paperwork.

Meanwhile, Sarine, the Israel-based diamond tech firm, accuses DBC of copying the industry-standard Galaxy inclusion mapping software used by its rough diamond scanning machines and is taking action through the High Court of Gujarat, in Ahmedabad.

Source: DCLA