Signs of confidence in the world diamond and jewelry markets have sprung at key trade shows, despite the continued uncertainty in the world economy.
The late January Vicenza show saw strong international buying as Italian designers, who previously mainly focused on high-end pieces, tried to broaden their appeal with colorful, fashionable pieces made with attractive, but lower cost, gemstones set in low-karat gold or alternate metals. This move from high-karat gold coincided with a renewed influx of buyers from around the world.
In the U.S., the Centurion Show in Scottsdale, Arizona, which focused primarily on high-end independent jewelers, saw strong buying across the board, especially for distinctive designer pieces and higher quality diamonds and gemstones. Buying at the various Tucson gem shows was also much stronger than expected, especially because traffic appeared to be down from previous years. Prices for top gems – such as unheated ruby and sapphire, and Colombian emerald – were still extremely strong. Even attractive lower-cost stones saw substantial increases from the previous year. According to attendee reports, dealers attributed the higher prices to the strong increase in demand from Asia.
This renewed confidence coincides with a report from the Organization for Economic Cooperation and Development (OECD) that noted firming economic growth in key markets such as the U.S. and Japan. The OECD forecasts, however, that China and India may see “growth below [the] trend” of past years. Growth in gem and jewelry sales in China has been spotty, largely confined to so-called “third-tier” cities (medium-sized inland cities underserved by retailers) in the past year.
Blue Nile’s numbers also give reason for optimism. The company’s engagement ring sales jumped 31% during the final quarter of 2012 compared to the previous year. Its quarterly sales of $136.1 million were the highest since 2007, before the world economic crisis hit. The company reported that its non-bridal diamond sales were below expectations because of a decline in discretionary spending this past season. To address this, CEO Harvey Kanter noted that the company would offer more classically designed pieces in place of very trendy ones.
Richemont, parent company of Cartier and Van Cleef & Arpels, cited the China slowdown as the reason for its slow sales in Asia for the final quarter of 2012. The company said fourth quarter sales in that region were flat compared to a 5% increase in North America. Richemont also noted that the uncertain economy of China made it difficult to forecast the state of business this year.
DIAMONDS: The diamond industry is awaiting De Beers’ February sight (Feb. 25-28). The general sentiment is for a relatively small sight because, while the firming world economy may help in the long run, diamond manufacturers still face liquidity issues as banks continue to tighten credit lines. The January sight of $450 million was smaller than expected, and the trade welcomed the stable prices. De Beers, and indeed other diamond producers, however, are under enormous pressure to increase revenues by raising prices.
Anglo American Corp., De Beers’ parent company, is seeking to raise revenue after several of its acquisitions ran into difficulty (primarily the Minas Rio project in Brazil) and in the face of more aggressive wage and benefit demands from labor unions. De Beers also encountered costly production problems at its largest mine, Jwaneng, last year.
Alrosa, the world’s second largest diamond producer by value, is engaged in costly mine redevelopment projects and appears to be moving to fill the supply gaps left by De Beers’ production problems. Reports from Antwerp say Alrosa has begun to sell rough in large quantities at prices comparable to De Beers.
Other producers, including BHP Billiton and Rio Tinto, are trying to boost revenues for the possible sale of their diamond operations.