Diamond Prices - Down According to RAP, Up from Vendors?

[SouthPhiladelphia]

I came across the following:

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=37366

Polished Diamond Prices Drop by 8.6% in Third Quarter
RapNet Diamond Index Falls 4.5% in September
Oct 5, 2011 9:32 AM By Rapaport
...
In September the RapNet Diamond Index (RAPI) for 1.00 ct. polished diamonds fell 4.5 percent to 99.57. The 0.50 ct. category declined by 4.5 percent to 36.47, and 3.00 ct. dropped 0.9 percent to 168.04.

The third quarter of 2011 has been one of decline for diamond prices following a positive first half of the year: RAPI for 1.00 ct. diamonds fell 8.6 percent, while 0.5 ct. stones declined 7.5 percent, and 3.00 ct. diamonds dropped 5.8 percent.
...

But am being told by a vendor I am working with that they are raising their prices on polished stones 2-3ct as of next week? Sales tactic or reality?

 

[stone-cold11]

The report says nothing about the carat range you are looking at so that group might be bucking the trend.

 

[denverappraiser]

There were no significant changes in the price suggestions by Rap fo 3.00-3.99 rounds during 3rd quarter 2011.

Your dealer can, of course, charge whatever they want and they are not always in lockstep with what Mr. Rapaport thinks. There WERE significant changes in other categories by the way. Some went up and some went down.

Rapnet Index is a rather different beast. It has to do with a statistical analysis of what dealers are trying to get for various categories of stones on his mostly US trading platform. Asking is not the same as getting and the prices reported to Rapnet are not necessarily the transaction prices when something actually sells. It is an interesting stat, and it is an interesting way of evaluating the diamond market as a whole but in the current situation, dealer inventories seem to be growing and they're selling elsewhere rather than discounting prices in a meaningful way. As a shopper, I wouldn't put much stake in it for useful information.

 

[Rosa]

This is an interesting topic - is there any view among the community of independent appraisers which way the winds will blow over the next year, in terms of larger diamonds (4+ carats up to about 6 carats, good/excellent cut characteristics, VS/SI, no lower than H?)

There are articles out there stating that demand is being driven by consumers in China and India, but in other articles it was said that is only for smaller stones. (Sorry, I normally like to cite my sources but read these articles some months ago and can't remember where.)

What do you professionals think? I am in no hurry and can wait a couple of years for a dip in prices. In late 2008 and throughout 2009, there were some amazing deals on 47th St, and we were fortunate to take advantage of that and bought some nice pieces, so I'm not desperate, yet. "-)

Feel like sitting tight for now b/c the prices just seem very high to me right now, especially given how bad the economy is.

 

[Blue-Seeker]

This is an interesting topic - is there any view among the community of independent appraisers which way the winds will blow over the next year, in terms of larger diamonds (4+ carats up to about 6 carats, good/excellent cut characteristics, VS/SI, no lower than H?)

There are articles out there stating that demand is being driven by consumers in China and India, but in other articles it was said that is only for smaller stones. (Sorry, I normally like to cite my sources but read these articles some months ago and can't remember where.)

What do you professionals think? I am in no hurry and can wait a couple of years for a dip in prices. In late 2008 and throughout 2009, there were some amazing deals on 47th St, and we were fortunate to take advantage of that and bought some nice pieces, so I'm not desperate, yet. "-)

Feel like sitting tight for now b/c the prices just seem very high to me right now, especially given how bad the economy is.

Agreed. I think retailers are sitting tight, waiting for the holiday season, and hoping consumer demand rebounds. I'm not seeing that happening. Not for the mid-range jewelry market in the U.S. anyway.

 

[Rosa]

If I had checked my email box more thoroughly yesterday before posting, would have seen this - it touches on what the other articles I had read mentioned - that India and China are driving the price increase, but my personal feeling is that there is a bit of wishful thinking here (that is my own wishful thinking at least!)
*******************

http://www.bloomberg.com/news/print/2011-10-18/de-beers-sees-diamond-prices-steadyng-after-rising-more-than-35-ceo-says.html

Bloomberg News
De Beers Sees Diamond Price Steadying After Rising More Than 35%, CEO Says
By Carli Lourens - Oct 19, 2011

De Beers, supplier of about a third of the world’s rough diamonds, said prices of the gems may “stick” at current levels after demand from India and China spurred a rally of more than 35 percent this year.

Rising wealth in the two countries is enabling consumers to buy more diamond jewelry, compensating for slower growth in the U.S., the biggest retail-gem market. Demand from East Asia has caused a supply shortage, which pushed up prices this year, Chief Executive Officer Philippe Mellier said in an interview.

“We’re now reaching a new plateau from which prices are going to oscillate,” Mellier, 56, said by phone yesterday. “I am expecting this new level of pricing to stick.”

Rough-diamond prices advanced 49 percent in the first half, accelerating after two straight years of more than 30 percent growth as stagnant output failed to meet Asian demand, according to data from PolishedPrices.com. De Beers was among producers caught on the back foot after idling mines as the global economic crisis eroded gem sales.

Retail demand in India and China is “very, very strong” and sales in the U.S. are growing, defying expectations of a decline, Mellier said from London. “All the numbers we are receiving from the U.S., from our partners, from our own stores, are telling us that the sales are up, not hugely up, but up,” he said.

New CEO

Mellier, a former Alstom SA executive, was appointed to head De Beers in May, marking a break with tradition as the Johannesburg-based company previously promoted from within. De Beers is 45 percent-held by Anglo American Plc (AAL), 40 percent by South Africa’s Oppenheimer family and 15 percent by Botswana.

De Beers estimated in February that the U.S. bought about 38 percent of diamond jewelry in 2010, with India making up about 10 percent and China and Hong Kong a combined 11 percent. “We don’t see any softening of the demand,” Mellier said.

De Beers should post record or near-record sales in 2011, Des Kilalea, a London-based analyst at RBC Capital Markets, said in a note earlier this month. Sales at De Beers’s trading arm will be about $6.4 billion this year, its second-highest result, according to RBC forecasts.

After rising from January to July, prices probably dropped as much as 25 percent, having “simply risen too far, too fast,” Kilalea said. Prices may hold steady in the next few months, he said.

‘Strong Demand’

“Our feeling, without sounding too optimistic, is that retail is generally strong,” Mellier said, in reference to global sales. De Beers expects “a pretty good start next year because there is strong demand from Asian customers.”

Russia’s OAO Alrosa, De Beers’ biggest rival, said yesterday that average sales prices rose 30 percent to $109 a carat in the first half, compared with $84 over the whole of 2010. Alrosa had sales of $2.1 billion in the half, while De Beers’s trading arm had $3.5 billion.

De Beers posted record earnings before interest, tax, depreciation and amortization of $1.4 billion in 2010 following a 57 percent surge in trading-division sales to $5.08 billion.

The company will probably produce 33 million carats to 35 million carats this year, compared with 33 million carats last year, Mellier said. A carat is equivalent to a fifth of a gram.

“It’s going to take some time for the industry to reach the production level of 2008, the last big production year before the crisis,” Mellier said, adding that it may take two to five years.

De Beers mines diamonds by itself and in joint ventures in South Africa, Canada, Botswana and Namibia.

Last month, the company agreed to move its diamond sorting and trading operations to Botswana by the end of 2013, ending an arrangement for sales in London that’s been in place since 1888.

De Beers hasn’t seen any “overreaction” to the plan from clients, many of whom already have operations in the southern African country, Mellier said.

To contact the reporter on this story: Carli Lourens in Johannesburg at [email protected]

To contact the editor responsible for this story: John Viljoen at [email protected]

®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

 

[Karl_K]

My personal opinion is for several reasons:
Good Christmas sales, prices will rise again in Jan/Feb
If sales are flat or lower than last year then there will be a glut of diamonds on the market in Jan/Feb as the cutters sell off stock to pay back loans.