There has been a lot of nervousness amongst dealers and buyers of both rough and polished diamonds regarding the state of the industry as international financial markets continue to weaken.
No doubt, some might have wobbled at the thought of the industry returning to the unforgettable 2008-2009 recession, which saw demand for rough diamonds taking a thud by 70-80 percent, forcing several mines and factories to either shut down or downgrade their operations.
The recent 15 to 20 per cent reduction in rough diamond prices by Australia-based BHP Billiton, a small firm compared to De Beers’ Diamond Trading Company (DTC) shook the confidence of (Indian) diamanatiares, who were already facing severe liquidity issues.
Results of a tender convened by a diamond junior, Firestone Diamonds, in Botswana also caused running stomachs as it showed demand on a downward trajectory.
From a total of 24,109 carats that were available for sale during the tender, Firestone said only 3,395 carats had been sold for a value of $863 037.
A total 20 714 carats, principally comprising smaller diamonds, were withdrawn as they failed to achieve reserve prices.
Reports, mainly from India, say most of the polished diamond traders, who feared that rough prices may further decrease ahead of the Christmas buying, had started selling their inventories, thereby compromising their bottom line.
"In the first half of this year, the rough prices have increased by 50-60 per cent but the polished prices are moving up on a very slow pace," the Times of India quoted the Surat Diamond Association president Dinesh Navadia as saying
"Polished prices are still 15-20 per cent below the prices of roughs, and are supposed to move up.”
Having seen how speculation on rough diamond prices was wreaking havoc among diamantaires in Surat, De Beers and Canadian diamond producers decided to maintain their current prices and supplies until the end of the year.
DTC chief executive Varda Shine was quoted by Tacy as saying that this would deter speculators from renewing speculative purchases and reassure those inclined to sell in a panic that there was really no reason to do so.
She even dismissed this vacillation saying the month of August was typically a quiet month due to the holiday period.
"Yes there is nervousness out there but I don't think diamonds are necessarily going to do badly out of that," Shine was quoted as saying by Reuters, adding that with investors shunning government bonds and banking shares, diamonds and gold were providing solid diversification options.
Although, this might have appeared as a move to restore confidence in the diamond industry dogged by anxiety, many sought to wait for the Hong Kong Jewellery and Gem Fair that took place between September 21 and 23 to get a hint on which direction the market would take.
Reports noted that several diamond suppliers at the fair had recorded “satisfactory” sales although buyers continued to show resistance on prices.
In general, buyers remained cautious as they avoided purchasing extra goods for inventory.
''People are not buying for stock because of the uncertainty in the market, which is why the show is not as strong as usual,'' Rapaport quoted Uri Schwartz, the chief executive of Israel-based A. Schwartz & Co as saying.
Bharat Daswani, of Hong Kong-based House of Jewels, also concurred with Schwartz saying that although demand from Mainland China had been strong, demand in Hong Kong was somewhat quieter.
Some Indian suppliers, facing liquidity issues, were said to have lowered their prices to generate cash at the show.
Although there was debate on the actual percentage that rough diamond prices had shed, and worse still on whether tenders reflected the actual market situation at any given time, the just ended Hong Kong show confirmed the anxiety that had gripped the market.
It was surely, safe to conclude that a dark cloud continued to hover above the diamond market, despite denials by some that gems remained attractive as an option to the shunned government bonds and stocks.
Mathew Nyaungwa, Rough&Polished
