Diamond data loses its shock value

By Leia Michele Toovey- Exclusive to Diamond Investing News

Since September, the diamond industry has seen figures reflecting the state of the global economy. The latest numbers to be received are the stats on February. Now, after six months the dire numbers have finally lost their “shock value”. The latest data show Belgium, Israel, India and the U.S. all witnessing high double-digit drops in their import and export data. Since the crisis hit, listed diamond companies have lost an average of 80 per cent of their market value.

The February numbers are an improvement over January, however, this is not saying much. In January, trade was virtually non-existent. For the near term, overall trading activity is expected to continue at low levels. In the face of the crisis, diamond miners have been focusing on ways to improve marketing and sales. ALROSA launched a pilot project to sell high-end diamonds for investment purposes back in September and joined De Beers, BHP, Rio Tinto and Harry Winston in launching a marketing campaign. Just recently, ALROSA signed a memorandum with the Leader Management Company to create a market for investment diamonds in Russia. The companies will work together to put the infrastructure in place to trade high-end cut diamonds as a marketable commodity.

The Global Picture

In India, the polished market is seeing an improvement in local demand. However, there are still very few foreign buyers. The local rough market is very slow and any goods sold are going for heavily discounted rates.

The Belgian market has witnessed some improvement; with increased demand for larger stones in the 3.00 to 6.00 carat range. Stock holders have complained that purchasers are looking at buying at unrealistic prices. In some cases, these low ball bids are being accepted. On Belgium’s rough side, demand remains low and diamantaires continue to work on existing inventory.

In Israel, diamond demand is strong in the 0.30- to 0.70 carat range.

China’s diamond wholesale market has warmed up and the retail market is surviving on bridal diamond demand. Purchases are strong 0.3- to 1.10-carat rounds, and wealthy households are taking advantage at purchasing 3 carats and above at 40 to 50 percent discounts.

Retail News

The weak retail market in the US has taken its toll on Tiffany & Co.’s fourth quarter 2008 sales. Weak consumer demand added to a few write downs caused fourth quarter profits to drop 76 per cent to $31.1 million. Tiffany took a one-time pretax charge of $97.8 million for an early retirement program. Approximately 800 employees were offered earlier retirement, 600 accepted the offer. There was also a $7.5 million pretax charge related to the anticipated closing of Tiffany’s Iridesse retail operations, charges of $12.4 million to write off an investment in diamond mining at the Jericho mine in Canada, and a pretax charge of $3.4 million to close its diamond polishing facility in Yellowknife, Canada. Overall sales declined 20 per cent to $841 million. Tiffany expects an 11 per cent decline in sales in 2009; and a coinciding 20 per cent decline in rough diamond prices.