The Rapaport monthly report states that polished diamond prices rose in January due to shortages.
The RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded diamonds rose 0.9% in January. RAPI for 0.30ct diamonds advanced 4.7% and RAPI for 0.50ct diamonds grew 4.5%. RAPI for 3ct diamonds fell 0.5%.
Elsewhere, RAPI for 1ct diamonds fell 4.4% from a year ago as manufacturers sought to reduce excess inventory in 2015.
The Rapaport Monthly Report demonstrates that polished prices rose in January due to shortages rather than increasing diamond demand. Polished trading was driven by US jewellers replenishing stock sold during the holiday season as well as some inventory purchases. However, uncertainty remains as consumer demand is sluggish in emerging markets. The stronger US dollar is negatively impacting tourist spending in the US and domestic dealer demand in India and China.
Expectations for the Spring Festival are muted as China’s economic growth slowed to 6.9% in 2015, its weakest growth rate in 25 years, and the Shanghai Stock Exchange (SSE) Composite Index slumped 23% in January. A global stock market correction in 2016 may impact discretionary spending due to a negative wealth effect.
Diamond market sentiment improved during January and dealers feel that the worst may be over. Prospects for manufacturers’ profitability improved as De Beers reduced rough diamond prices by an estimated seven to 10% at the January sight. The company’s sales surged 118% to $540 million during January, compared with $248 million in December. Rough demand increased as manufacturers started to raise polished production to fill gaps in supply.
According to the report shortages are expected to support diamond prices throughout the first quarter, as rough bought in January will take a few months to pass through the manufacturing process. That, together with the De Beers rough price correction, should help restore some profitability and confidence in the manufacturing sector.
Martin Rapaport, chairman of the Rapaport Group, said in his January 28 statement The Right Way Forward: “In the event that De Beers continues on a responsible path, we expect a healthy diamond market to emerge. Polished prices will adjust to the realities of polished demand.
“There may be some short-term corrections as a return to normal supply levels confronts relatively weak global demand, but we expect the markets to settle down quickly as long as the supply side of the equation remains consistent and profitable. China and the rest of the world will improve and enter new periods of growth and development. As long as the diamond dream is kept alive demographics will support consistent demand. In our view the mid to long term growth outlook for the global economy is positive and the same is true for diamond prices and markets.”