The U.S. market has been quiet as expected in the summer with the JA New York Show dominating activity this week. Traffic at the show was very slow and buyers who attended came to brows rather than close deals. Nevertheless, some companies – mainly lower price point sellers and mainstream bridal dealers reported “better than expected results.” Retailers on 47th Street noted that consumer traffic was extremely quiet causing great concern for their future and means of lively hood.

Bourses in Belgium closed for the three-week summer vacation, causing a temporary halt in trade. Some diamantaires are planning to attend the India International Jewellery Show (IIJS) next week, but most are taking time to relax before the — busy, it is hoped — fourth quarter.

The market in Israel has been quiet as diamantaires prepare for their three-week vacation period, which begins next week. Some companies are attending IIJS with the hope of boosting sales, but it is not seen as a major event. There has been an improvement in activity for larger diamonds above 3.00 ct., and even for stones larger than 10.00 ct., due to prices softening to 30 percent below list. Demand continues to be high for 0.50-1.50 ct., D and J-M, SI and VS goods.

The industry in India is focused on IIJS, which begins next week in Mumbai. Expectations are high that the large contingent of foreign buyers attending the event will boost market activity, which has slowed in the past two weeks. Diamantaires are viewing the show as an opportunity to better assess market conditions. There remains uncertainty in the industry, as profit margins are being squeezed by disparities between rough and polished prices. Manufacturers have paid high prices for rough but are unable to get adequate prices for the finished polished goods. As a result, dealers and manufacturers have started to resist high prices on rough stones. In the polished diamond market, there is increased demand for goods below 0.18 ct., SI+.

A large delegation of buyers from China is traveling to India next week for the IIJS show hoping to find some bargain buys by avoiding dealers and middlemen. They are expected to look for parcel goods under 0.20 ct. and 0.30-3.00 ct., D-H, VVS-SI, to satisfy demand in China. The market has showed little change in the past week, with trading activity quiet but stable.

Hong Kong has turned quiet as a gap has developed between prices being offered by local buyers and those requested from the cutting centers. There is sporadic demand across the board, with traditional Hong Kong goods of 0.50-2.00 ct. H-K, VS-SI, being the strongest. Dealers have adopted a wait-and-see attitude in the run-up to the September show.

Between the Lines

The rough market has quieted somewhat in the past weeks, as diamantaires are resisting further price hikes from the mining companies. This trend should worry De Beers and ALROSA, which are relying on stronger third and fourth quarters to improve on weak performances so far this year. Both companies are looking to sell around $2 billion worth of rough in the second half of 2009, with Fyodor Andreyev, ALROSA’s new president, reportedly expressing this goal this week. His target is ambitious to say the least, given that the Russian miner sells about $1.2 billion worth in a good half-year period. The question is: Can the market contain such volumes? And how will pricing be affected? While De Beers recently raised prices, causing Indian manufacturers to pull back on their aggressive buying, it could make some downward adjustments if demand at the next sight or two doesn’t meet the company's expectations. However, if ALROSA indeed plans to “dump” its stockpiled diamonds on the market too quickly in the coming five months, this would further impede a stable recovery of rough prices.

Gitanjali Gems, the Mumbai-based diamond manufacturer and retailer, remains on the expansion path in terms of sales, profits and locations. The company’s sales in its first fiscal quarter rose 11 percent to $279.2 million, with profits up 9 percent to $9.4 million. Gitanjali’s jewelry segment is increasingly becoming its flagship business, as sales there grew 38 percent, while diamond sales rose 5 percent. In line with this trend, the company is aggressively expanding its operations in India and abroad, and plans to increase its store presence in the U.S. — through its Rogers and Samuels locations — to 200 stores, from its current 145.

Major luxury retailers continued to post poor first-half results. LMVH Moët Hennessy Louis Vuitton reported that jewelry and watch sales in the first half fell 17 percent to $491.3 million (EUR 346 million). The company said the “difficult” retail environment was marked by destocking, while jewelry and watch brands were maintaining rigorous cost management. There was some sign of improvement, however, in the second quarter, when LMVH's jewelry and watch sales fell approximately 8 percent, whereas first-quarter sales declined 27 percent.

Diamond prices at auction continued to show resilience, according to Christie’s. Despite reporting that jewelry, jadeite and watch sales fell 38 percent to $129.6 million in the first half of 2009, the auction house said that diamond prices at its New York sales in April and June “remained very much in line with those achieved at the same time last year.” While the rest of the market — particularly the better-make high-end goods — dropped dramatically in value during the six months compared to the same time last year, the auction market continues to be an anomaly in the diamond industry.

Quote of the Week

As we all hope new opportunities will come the way of the diamond industry through the summer and beyond, it may be worthwhile to listen to Walter Percy Chrysler, founder of the Chrysler Corporation, who said, “The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers.”