Mordy Rapaport reports on the current state of the diamond market.
Mordy Rapaport kicked off IJL’s seminar schedule yesterday with his report on called The State of the Diamond Market, offering insightful viewpoints, fact and figures on current polished and rough diamond demand.
Among the data and market trends outlined by Rapaport was the boom in under 25s in key diamond-buying markets that he stated should not be ignored as they will be the buyers of tomorrow.
"Demand for diamonds is sky rocketing in countries such as India and China with populations of billions. These countries are now coming online and are purchasing items on the web. Their population under 25 years of age is where the future lies; in India for example 48% of the population is under 25."
Rapaport stated that current demand backs up this view, describing supply and demand for diamonds in China and India as "amazing".
Other topics covered during the seminar included diamond prices, which Rapaport reiterated were naturally volatile. Presently rough prices are about 12% ahead of polished stone prices; something Rapaport says is unsustainable and will eventually falter.
Prices are being affected by foreign exchange rates, as well as those buying into rough diamonds akin to futures markets, with the hope that the stones will increase in price at a later date.
He added: "The other reason for why rough diamond prices are ahead of polished is that about six companies feed the diamond market, placing stones in certain markets and deciding where they are sold."
With a view to the polished diamond market, Rapaport noted the climb in 1ct prices in 2010 and 2011, while more recently the average 1ct price is heading downwards, similarly impacting 2ct and 3ct stones.
He also questioned whether high prices are a good or bad thing for the diamond market, asking whether you make more money buying or selling stones.
"Higher prices mean higher profits for the mining companies," Rapaport stated. "Prices have been rising and rising while less product is selling. Diamonds are having to compete with other luxury purchases so high prices are not always a good thing."
Rapaport also touched on where diamonds are being imported and where sales are strongest, noting that the US remains the largest purchaser of finished diamond product, in particular through third parties such as pawnbrokers.
"Baby boomers are selling off their diamond jewellery to pay for their grandchildren to go through college and because the re-selling market isn’t always efficient they go through pawn shops.
"As a result there is an ongoing joke that there are more diamonds coming out of the US than from South Africa," Rapaport said.
Imports to China are growing while India’s diamond imports are somewhat lacklustre, owing to the country’s ongoing taxation and government policy issues. Rapaport explained that investors are now taking money out of India to invest in diamonds and diamond jewellery elsewhere because of ongoing instability in import tax and monetary issues.
Of note is the growing diamond market in Dubai, which Rapaport joked appears as though it has discovered a diamond mine. Dubai’s recent imports of rough totalled $3.3 billion while its exports totalled $6 billion, thought to be symptomatic of "round tripping" whereby diamonds are sold into the country from the US before being shipping to India for polishing.
Rapaport ended by explaining where the market stands today, outlining that retail sales for diamonds are up globally, in line with the increase in gold price, while 1ct stones in relation to the gold price have depreciated in recent times so arguably those investors looking at diamond as an investment would have been better to invest in gold.