Industry Analysis

De Beers Raises Prices at April Sight, Basel Business Report

Russell Shor, Senior Industry Analyst
April 14, 2014
Mozambique ruby, which rivals Burmese ruby in color, was readily available at Baselworld and helped temper the lofty prices Burmese dealers have been asking in recent years. These small, high-quality clean rubies are from Montepuez, Mozambique. Photo by Vincent Pardieu/GIA
De Beers, as expected, boosted prices at its April 1-4 sight, which totaled about $740 million. The increase, averaging 2.5% to 3%, was concentrated in a relatively narrow range of goods ‒ mainly those that would polish out to half- or one- carat gems‒ that were in high demand.

The price increase was expected given concerns in the past two months that the rough market was “overheating” and once again falling into speculative buying. Polished prices also have edged up a few percentage points from January, but are still lagging behind rough increases, which have again squeezed profits.

The activity in the rough market has prompted the industry’s leading lenders to restate the new credit policies they announced last fall: they will provide funding for 70% of the value of rough purchases, not 100%, to dampen speculative buying. As the results of recent tender sales indicate, however, a number of companies remain willing to bid up rough prices even with reduced credit.

Unlike last year, sightholders did not defer any purchases at this sight. One reason is that the most of the rough could still bring a small profit after polishing. Another is that De Beers begins its selection process for the next sight period in June and clients may want to make a favorable impression.

Most diamond traders believe the rough market will be quiet for the next several months to see how the year shapes up.

BASEL REPORT: Business was subdued overall at the recently concluded Baselworld (March 26-April 3). Sales in the gemstone hall were slightly up from last year, but buyers generally passed on many of the extreme high end pieces: colorless diamonds over 10 carats in high colors and clarities and larger pink and blue fancies.

Large colorless diamonds were priced 15% to 20% higher than last year and fancy colors were up 20% - 30%, but these prices apparently went beyond the limit for many well-heeled buyers. Large fancy yellow diamonds were in abundance at the show, but dealers reported that demand was much weaker than in the past.

What did sell were colorless diamonds in the 3 carat to 5 carat range, which were up about 10% in price from last year. Buyers felt these goods were moving well in consumer markets in the U.S. and Asia. China demand has slowed considerably, but is still reasonably healthy, while the U.S. is showing signs of a much better year.

In colored stones, Mozambique ruby, which rivals Burmese ruby in color, was quite abundant in high colors. This has helped temper the lofty prices dealers of Burmese material were asking in recent years.

Demand for no-heat sapphire remained strong. That “anti-treatment” sentiment has spread to emeralds, with a number of dealers offering “no-oil” goods. Prices for untreated top goods, with the exception of ruby, were 20% to 30% higher than last year, but, as with diamonds, buyers were very selective.

Indeed, dealers and buyers alike said that prices of colored stones, especially the higher qualities, have risen beyond what can be justified by demand, so they are limiting buying to only what they can immediately sell. “No one wants to be caught with lots of goods in a price correction,” one exhibitor said.  

This year, two additional shows opened to capitalize on the overflow from Baselworld.

The Rapaport Diamond Show, held near the main rail station in Basel, featured nearly 70 exhibitors, including a delegation from the New York Diamond Dealers Club. Business at the three-day show appeared to be slow, though some reported a pickup in traffic on the final day.

The Jewellery & Gem Fair-Europe, in Freiburg, Germany (about 50 miles from Basel), was also new, with approximately 200 exhibitors from around the world. The organizer, UBM Asia, which runs the Hong Kong shows, branded it as a sourcing show (in contrast to Baselworld as a branded merchandise show). Accordingly, most of the exhibitors and products were aimed at the middle- and lower-priced markets. The show was well-attended for the first day, though some buyers complained about the transportation to and from Baselworld.

A number of exhibitors at Baselworld said they hope the Freiburg show succeeds so they can jump the costly ship in Basel and move into this show, for one-tenth to one-eighth of the cost.

AUCTIONS: Cartier helped set a price record for one of its signature pieces at its April 9 Hong Kong sale. The jewelry house paid $27.4 million for the Hutton-Mdivani jadeite bead necklace; the highest price ever paid for a piece of jadeite jewelry at auction.

The necklace, formerly owned by Woolworth heiress Barbara Hutton who died in 1979, features 27 “highly translucent green jadeite beads” ranging from 15.4 mm to 19.2 mm in diameter.

In addition, a 29.62 carat Burmese ruby set by Cartier, sold for $7.3 million, the highest price ever paid for a ruby at auction.

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