In the beginning of 2010 diamond wholesalers spread a rumor - not without grounds - that they expected this year an essential and systematic increase in polished prices. On March 17, the representative of the jewelry center in Shanghai, who wished to remain anonymous, said that procurement prices for imported polished diamonds had already born down on many jewelry companies in China. It will be remembered that Diamond Trading Company (DTC) announced a small increase in price for cheaper stones as far back as December 2009 (http://www.rough-polished.com/ru/news/34261.html).
There was an impression that after the statement made by the HRD Antwerp’s CEO at the press conference in China on March 15 - that in 40 years diamond resources will be exhausted bringing about gradual growth of prices for polished diamonds, especially for first-rate quality stones – the puzzle was solved. And though the rise in rough prices amounted to 7-10% jewelry end users will see a price hike of 10% to 20%, while prices for high-end polished diamonds will increase much more noticeably - by 40% to 50%. According to expert estimates, this trend will already become apparent in April.
Chinese jewellers look very optimistic since the number of their clients has considerably increased in comparison with the last year. In February, on a crowded background of traditional and modern holidays some jewelry stores managed to sell 80 and more carats of polished diamonds. At the same time, with going up sales there emerged a new trend: cheaper stones of poorer quality were snatched away from the stores at an ever increasing speed, while diamonds of high color, clarity and cut began to rise in price in direct proportion to their quality turning scarce and thus hard to buy.
After the Hong Kong Jewelry Show a story of “how one country bumpkin bought a diamond” was the talk of the town. According to http://zuans.com, a Chinese diamond portal, a certain jewelry businessman from Hangzhou who visited the exhibition bought a 1.1 ct diamond of high quality in every respect: D, VVS and “Excellent” cut. He paid for it around 100,000 yuans (almost $15,000). It would have been not at all bad but for one thing – just a month earlier such a diamond was worth from $10,000 to $11,000. It appeared that in a very short time such stones went up 40% to 50% in their selling price. In the opinion of experts, a ring with such a diamond will cost al least $35,000.
Regular stones also have risen in price but not that high, just by 7% to 10%. Insiders believe that due to the ready market for such diamonds it means a 10% to 20% increase in their import prices. After the Chinese New Year, many jewelry factories renewed operation in March and their products made of newly priced raw materials will hit the market only in April. “This will be the time when everybody will notice a rise in prices,” a Chinese merchant said.
Besides increased purchasing prices, the market is also heated by scarce supply. Despite the protest of some sightholders against prices raised by DTC, the latter’s decision is final and besides prices will continue their upward climb in future. As it was repeatedly noted by the Financial Times, the world financial crisis dealt a sensible blow to the diamond market which was lately weathering its worst years.
According to the Mining Journal, in response to the slump on the global diamond market on the backdrop of the economic downturn the De Beers Group reduced its diamond output in Botswana and Canada which in turn echoed in China driving demand over supply and accordingly pushing up prices. Interestingly, the Times Online Portal tied De Beers’ deflated output to the fact that “the new Russians could not any more afford bluing their fortunes to buy diamonds for their women,” which finally morphed into a diamond bottleneck for the Chinese.
There is also one more delicate factor which played an obvious role in pushing prices up which has a simple name, contraband. Recently, the Chinese customs has doubled its efforts to fight down illegal import of rough and polished diamonds – reports about regularly arrested large parcels of illicit diamonds appear in the Chinese press on a permanent basis, once a month. Obviously, for preventive purposes.
Indeed, even the import duty for diamonds slashed from 17% to 4% in 2006, paradoxical as it may seem, has not stopped or even reduced illegal import of stones, but on the contrary it has served to increase the magnitude of smuggling 2-3 times in 2007-2008. The authorities came to the conclusion that if an amicable way is impossible, it is necessary to take more drastic measure and came with a crack-down at the borders.
This turned to be a big obstacle in the way for cheap stones to the Chinese market. The use of smuggled diamonds is a well-known "secret" in the jewelry industry of China. About 40% of diamonds used in jewelry produced by some brands were stones which entered the Heavenly Empire avoiding the customs.
Now that control has become tougher diamonds will have to be bought strictly at the Shanghai Diamond Exchange and this will entail a cost increase resulting in higher prices for jewelry sold in retail. But if in 40 years there will be no natural diamonds left for supply it probably means you have to buy them now and buy as much as you can? It is quite possible that Chinese jewellers will appear correct in their reckoning.
Olga Patseva, Rough&Polished, Shanghai
