Robust Demand Brings Increased Rough Diamond Sales
July 23, 2018
Demand for diamonds and jewelry has been good around the world this year, and De Beers and Alrosa are betting it will carry through to 2019. Both companies have increased their sales volumes of rough diamonds significantly this year, based on this assumption.
De Beers announced it sold $575 million at its June 18-21 cycle (sight) and other allocations, a 6% increase over the same period last year. De Beers rough sales for the first six months of the year are even with or slightly behind last year’s total because of caution in the early months. The company often restates its monthly sales totals upwards, however, to account for deals made after the announcements, which usually come in the final week.
Alrosa, the Russian diamond agency, sold $390.3 million worth of rough in June, an 8% increase over sales for the same month last year. The company’s rough sales for the first half of the year are also up 8%. Alrosa markets nearly all diamonds produced in its home country and the Catoca deposit in Angola. The higher totals came from increased sales volumes and not as a result of price hikes.
“Sentiment in the diamond industry’s midstream is positive following the JCK Las Vegas trade show at the start of the month, and we continued to see good demand for our rough diamonds across the product range,” said De Beers CEO Bruce Cleaver in announcing the cycle totals.
Boutique diamond producers continue to find very large diamonds.
Lucapa discovered a 114 carat (ct) diamond at its Lulo Mine in Angola on July 11 and an 89 ct yellow at its Mothae Mine in Botswana last month. Canada’s new Gahcho Kue mine produced its largest diamond thus far, a 95 ct colorless crystal.
Lucara Mining, which found the 1,109 ct Lesedi La Rona diamond at its Kerowe mine in Botswana several years ago, is again concentrating its extraction activities in the portion of the kimberlite that produced the Lesedi La Rona and several other very large crystals. A recent bulk sample from the section found 47 diamonds weighing more than 10.8 carats, including a 100 ct-plus and six larger than 50 carats.
The Kimberley Process reported that world diamond production in 2017 increased 19% to 150.9 million carats, due in large part to two new mines in Canada, Gahcho Kue and Renard. Canada is the world’s second largest diamond producer with 23.2 million carats valued at $2.06 billion, behind Russia, which mined 42.6 million carats valued at $4.1 billion.
The recent Supreme Court decision allowing U.S. states to collect sales taxes for online sales is a victory some 30 years in the making for Jewelers of America (JA), a trade organization representing companies from all areas of the jewelry supply chain. Ever since U.S. catalog companies began to sell jewelry and not charge sales tax except to customers living in the companies’ home state, JA has argued that it gives remote sellers an unfair advantage. The situation grew much more acute with the rise of online sales.
The savings on a high value piece of jewelry can be considerable. Some 45 of the 50 states collect sales taxes, the highest topping 9%, with some local jurisdictions (New York City and Las Vegas, for example) tacking their own levies onto the state rates.
Exactly how much or how little brick and mortar retailers will win from the decision remains to be seen. As usual, the devil is in the details because every state has a different rate, different rules (some items are exempt from taxation, for example) and different processes for filing. Also, since many brick and mortar jewelers now have online businesses, this court decision could become a doubled-edged sword.
The court ruling, of course, does not bring immediate change because each state must enact its own online tax collection rules. And some states already charge sales tax for online transactions. For example, Blue Nile collects sales tax from customers in Hawaii, Maine, Mississippi, New York, Oklahoma, Virginia and Washington state because it has physical presences (nexus) in these states, and Amazon collects sales taxes from every state that has a sales tax.
Russell Shor is senior industry analyst at GIA in Carlsbad.