Polished diamond market sentiment improved in December as shortages supported prices and dealers filled last-minute holiday orders. Initial reports about U.S. holiday season jewelry sales are positive. General retail sales were up about 8 percent with online mobile sales up 50 to 60 percent. However, there is still very limited dealer and retailer diamond inventory buying due to uncertainty about U.S. post-holiday demand and the Chinese New Year.

The RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded diamonds rose 1.5 percent in December. RAPI for 0.30-carat diamonds advanced 4.7 percent and RAPI for 0.50-carat diamonds grew 3 percent. RAPI for 3-carat diamonds fell 0.1 percent.

For the full year 2015, RAPI for 1-carat diamonds declined 5.8 percent. RAPI for 0.30-carat diamonds dropped 13.4 percent, while RAPI for 0.50-carat diamonds slumped 14.5 percent. RAPI for 3-carat diamonds fell 14.5 percent in 2015.

RapNet Diamond Index (RAPI™)
December 4Q 2015 2015
RAPI 0.30 ct. 4.7% 8.1% -13.4%
RAPI 0.50 ct. 3.0% 3.0% -14.5%
RAPI 1 ct. 1.5% 0.9% 5.8%
RAPI 3 ct. -0.1% -1.1% -14.5%

Copyright © by Martin Rapaport

 The Rapaport Monthly Report notes that there is a shortage of select diamonds as suppliers gradually sold off better-quality inventory and manufacturers limited polished production due to high rough prices.

The Manufacturers in India kept their factories operating at about 30 percent below capacity after they returned from the November Diwali break. De Beers and ALROSA kept rough prices stable throughout the fourth quarter but both companies reported that rough prices dropped 15 percent during the full year. Rapaport estimates that De Beers rough sales fell 45 percent to approximately $3.6 billion in 2015, with a 70% decline in the second half.

Sightholders expect De Beers to reduce prices by 5 to 7 percent at the next sight (Jan. 18-22). Rough demand is anticipated to increase as manufacturers raise polished production to fill the shortages in the market. However, rough buying is expected to remain below levels seen in previous years.

Dealers are uncertain whether the polished market will continue to be supported by supply shortages or if trading will become demand-driven as retailers refill inventory sold during the holiday season. Furthermore, while Far East demand improved ahead of the Chinese New Year (Feb. 8), sentiment remains cautious due to slower economic growth and the Chinese government’s anti-corruption campaign. The 7 percent slump in stocks on the Shanghai Stock Exchange on Jan. 4 fueled further caution.

The industry ended a tough 2015 on a positive note. To maintain the momentum, the trade will need to ensure profitability with lower rough prices while polished prices must be supported by stronger consumer demand.