Diamond market overview
Overall polished has slowed down due to the Jewish holidays and ahead of India’s Diwali when manufacturers close for a two week holiday. The Savigny Luxury Index showed a 2.8% increase in September, suggesting the luxury sector has bottomed out. Major luxury goods groups, including Richemont and LVMH, reported strong first half-year earnings. Although, Hermes cautioned a looming currency issue if the euro continued to strengthen could affect earnings. The main polishedprices index ended the week lower, opening at 115.93 on Friday, from 116.69 at Monday’s opening.
Following the De Beers sight this past week, sightholders reported weak demand in the secondary market. “There is some demand with low digits premiums (on De Beers rough boxes) if any,” said one trader. “I suspect better than warranted uptake (from De Beers) as sightholder contracts are being reviewed,” he added. In the secondary market, there was growing caution. “Trading is on the quiet side, the mood is gloomy,” said one trader. Meanwhile, Russia’s Alrosa reported a 32% drop in sales in September, compared to the same month last year, highlighting the weakness in rough. In other news, AIMS-listed Petra Diamonds said it might breach its debt covenants, while Firestone, Mountain Province and Stornoway received downgrades from RBC, based on their first few quarters of performance.
Corporate and events
Petra Diamonds said it was likely to breach a key condition of its banking agreements due to labour disruption at is South African operations and uncertainty around sales volumes in Tanzania, moneweb.co.za reported. The company said it had told lenders it was likely to breach a core earnings ratio this financial year that is part of its banking arrangements, said the moneyweb.co.za report.
Russian diamond major Alrosa sold $309.7 million worth of rough and polished diamonds in September – a 32% decrease on its sales in the same month last year, miningweekly.com reported. Rough diamond sales amounted to $305.8 million and polished diamond sales to $3.9 million, compared with year-earlier sales of $435.1million worth of rough diamonds and $18.9 million worth of polished diamonds, the miningweekly.com report said. “The decline in sales in September compared with the same month in 2016 is due to lower activity level in the market, particularly caused by the early beginning of the Diwali festival in India this year, for which reason many factories are closed for a long period,” Alrosa VP Yury Okoyomova said, according to the miningweekly.com report.
RBC has downgraded Stornoway Diamond Corp, Firestone Diamonds and Mountain Province Diamonds based on their first few quarters of performance, mining-journal.com reported. Each miner got a diamond operation into production this year, the first openings since Alrosa’s Karpinskogo-1 mine in 2014. RBC analyst Richard Hatch said the three miners were struggling to get forecast prices for their rough diamond products, the mining-journal.com report said.
The Savigny Luxury Index gained 2.8 percent this month, a touch more than the MSCI’s 2.6 percent gain. First-half results provided further evidence of the luxury sector’s recovery, although caution over currency headwinds dampened investor enthusiasm, businessoffasion.com reported. Strong results continued to pour in from different segments of the luxury industry: at one end, leather goods primo Hermès announced record-breaking first-half results, achieving its highest operating profit ever with a margin of 34.1 percent; at another, hard luxury leader Richemont announced a sales growth of 12 percent for the first five months of its current financial year (ended March 2018), said the businessoffashion.com report. This seemed to confirm that the luxury watch sector has finally bottomed out, although the figure was boosted by a buyback of watch inventory in order to clear up the supply chain and prevent a grey market from developing. Whilst both companies’ results echoed the good feedback from the luxury sector in general, Hermès poured cold water on investor hopes by pointing to a looming currency issue if the euro continued to strengthen, the businessoffashion.comreport said.
The International Institute of Diamond Grading & Research (IIDGR), part of De Beers Group, announced it will provide diamond verification services to Singapore Diamond Mint Company’s (SDM) new investment-grade diamond product, Diamond BullionTM, listed on the Singapore Diamond Investment Exchange (SDiX). IIDGR will use its proprietary diamond inscription technology to inscribe a unique identification number on the tables of each diamond used in the Diamond Bullion, which will confirm the natural origin of each diamond sealed in the bullion.