The much-vaunted Hong Kong Jewellery and Gem Fair, which took place in September, failed to ease some nerves in the diamond industry that had hoped to see demand recover amid fears of a double-dip recession in the U.S and the European sovereign debt crisis. Although several diamond suppliers at the fair had recorded “satisfactory” sales, buyers were cautious as they avoided purchasing extra goods for inventory.
With the Hong Kong show now behind us, the focus was now on the festive season and some have already started “casting lots” to “see” whether there would be any trade boom or doom.
The festive season was traditionally a period that the diamond industry experienced best sales as loved ones stampede to spoil each other with precious stones.
World Federation of Diamond Bourses (WFDB) president Avi Paz was confident that this year’s festive season would be a busy period.
"As the pace of polished sales is now set in the major Asian markets, in particular in China and India, we have good reason to be optimistic about significant growth in those markets,” he was quoted as saying then by Diamond World News Service.
“We are hearing positive forecasts for the upcoming (Hong Kong) fairs and I expect diamond prices to remain strong."
However, given that the Hong Kong show did nothing much to massage the worried industry, one would say Paz’s optimism had been wasted.
On the other hand the Indians that he said would help contribute to a “busy” festive season were blowing a vuvuzela of pessimism.
India’s Business Standard reported recently that the local industry, which in 2009 suffered its worst downturn, feared sales would decline 10-15 percent in domestic as well as international markets this festive season.
“There is uncertainty in the (diamond) market and this festive season may not be a fantastic one for diamond players. We cannot rule out the possibility of a decline in sales against that in last year, but those who have set aside a budget for diamond purchases would certainly buy diamonds,” said Tehmasp Printer, managing director, IGI India.
The paper said that the erosion of rupee (local currency) value against the dollar and poor demand from key foreign markets were the main reasons for declining sales.
The dollar had gained about 10 percent against the rupee in the past two months pushing the cost of dollar-quoted imported diamonds northwards.
Away from India, a Rapaport research released recently in New York also showed that certified polished diamond prices fell in September as dealer trading eased due to higher concern about the global recovery.
The RapNet Diamond Index for 1.00 carat (ct) polished diamonds fell 4.5 percent to 99.57 in September, while the 0.50 ct category declined by 4.5 percent to 36.47, and 3.00 ct dropped 0.9 percent to 168.04.
Rapaport said the diamond industry also closed 8.6 percent weaker during the third quarter of the year, clearly showing the liquidity crunch in the cutting centers and ongoing instability in the financial markets.
It said polished trading was being driven by retail demand to satisfy current orders, with limited trading among dealers.
Stretched Indian liquidity, said Rapaport, continued to impact trading with those cash-strapped suppliers willing to discount.
It said rough dealer trading was also at a near decline with De Beers’ goods being offered at deep discounts.
Rapaport said although the Chinese demand for diamonds and diamond jewelry continued to drive growth, the European debt crisis would have an impact globally.
"The diamond trade must accept the fact that diamonds are part of the real world and that diamond prices go up and down,” said Martin Rapaport, chairman of the Rapaport Group. “Price volatility is to be expected and accepted as a normal part of doing business.”
From the look of things, this festive season will not be as busy as the optimistic among us suggested.
However, as we wait for the season to be fully upon us, let the “casting of lots” continue.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
