Diamond Gems Weekly - August 12.
I just returned from India, exhausted from an unexpected eight-hour layover at Dubai airport, which left me wondering what I did to deserve such karma. I have my theories... But, as I wandered aimlessly through duty free, between binge-watching old Seinfeld episodes, my mind started to race. What lessons were learned from my trip? Why did it feel more positive than usual? And yet, what’s causing the deep uncertainty evident in the local diamond trade?
Yip, that’s how we diamond nerds pass the time. So, let’s get to the news to make sense of it all:
1. The India International Jewellery Show (IIJS), which was the main reason for my trip and ends on Tuesday, is predominantly for the domestic Indian market. There were two factors that drove strong activity at the show. The first was the gold market boom, stimulated by the government’s decision last month to reduce import duties on the yellow metal from 15% to 6%, as my friend David Brough explains here.
2. The second factor is the expansion of retail jewelers across the country. New stores require inventory, which is stimulating demand across all product categories, including diamonds. See my three takeaways from the IIJS show in my latest Diamond Minute video.
3. The expansion will see some conglomerates enter the market, as branded jewelry continues to drive growth. The largest of the established players is Tata Group’s Titan Company, which claims an estimated 7% market share through its Tanishq, Mia, Zoya and Carat Lane brands. Titan’s jewelry income grew 19% to INR 9.07 billion ($108 million) in the fiscal first quarter that ended June 30. See its revealing presentation here.
4. The feedback about retail growth did leave me wondering if I was being too positive about India’s jewelry prospects. Perhaps optimistic is the better word. And it is limited to retail and gold. India’s influential diamond manufacturing sector is feeling the pinch, and cutting production by around 50% due to the slowdown in global diamond demand.
5. Oversupply of the midstream, along with slow retail sales and the seasonal summer lull influenced polished prices to decline in July.
6. All that is causing diamond miners to reduce supply and cancel rough sales. De Beers will combine its August and October sights into one September sale, while Petra Diamonds will merge its August tender of South African goods with its October one. Here’s my take on the Petra move.
7. Rio Tinto is struggling to sustain diamond revenue in the current weak environment and as its Diavik mine nears closure. But a massive solar project at the mine is keeping things interesting at one of Canada’s iconic diamond operations. (Watch my video analysis).
8. It appears the great Clara experiment is coming to an end for Lucara Diamond Corp. The platform, which was billed as the great disruptor in the way rough is sold, is now up for sale. The mining company has received offers and expects to close a deal in the next 12 months. Lucara reported revenue grew 7% to $41.3 million in the second quarter and was up 1% in the first half. The rare growth resulted from Lucara’s sale of rough specials to HB Antwerp.
9. Mountain Province sold more diamonds in the second quarter than a year ago, but net sales fell due to the sharp drop in its rough prices. The company owns a 49% share of the Gahcho Kué mine in Canada with De Beers holding the rest. Mountain Province reported a net loss of $17 million as sales fell 43% to $41.5 million. Sales volume rose 55% to 557,361 carats but the average price declined 40% to $74 per carat.
10. By now, we know that record high gold prices and challenging macroeconomic conditions are squeezing consumer spending in China. In the latest reminder, Chow Sang Sang warned that profit declined by up to 40% in the first half of the year.
11. Macroeconomic challenges are also exerting pressure on US retailers, with widespread reports of promotional discounting. A decline in the average order value dragged down sales at Brilliant Earth in the second quarter. The jeweler reported revenue fell 4% to $105 million, with orders up 3.6% to 44,404 but their average value down 7.7% to $2,374.
Entrance to the IIJS show.
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