ABN AMRO Report: diamond market recovery grinds to a halt

Albert Robinson

A clear improvement in the diamond trade at the end of last year has petered out since the start of 2017 due to disappointing US economic growth and consumer spending in Q1 which has weighed on end-demand, as well as lower consumption in Hong Kong and Macau has also negatively affected demand for diamond jewelry according to company reports from main jewellers in the region, said ABN AMRO Bank in a report.).

In addition, Chinese retail sales were weaker in January and February, though there was a recovery in March, said the bank, a major financier to the diamond and jewelry industry.

Antwerp diamond trade data show that the improvement in rough trade has already peaked while polished trade never recovered in the first place. These data also show that Antwerp diamond exports to China (also because of a gap in the data), Hong Kong and the US have been very weak.

The only bright spot has been exports to India which highlight a pick-up in activity in Indian diamond manufacturing. India is the global diamond manufacturing hub. In terms of end-demand India only accounts for around 7 percent of global demand. However, Indian diamond export data paint a less convincing picture. Moreover, the announcement of the higher Goods & Service Tax (GST) in India has resulted in concerns that it will ruin small traders and manufacturers. As of July 1, GST on polished diamonds will be 3 percent, on diamond trading 18 percent, and on rough diamonds 0.25 percent.

As is the case for the Antwerp diamond trade, the UAE polished diamond trade has also deteriorated. The Israel diamond trade has improved considerably but the question remains for how long, as the improvement has already been substantial.

As mentioned above US consumer spending (largest diamond market) has been disappointing. Moreover, in recent years, Chinese jewelry consumption of the various precious metals has declined substantially. The anti-corruption measures are probably an important reason for the decrease in demand. However, Chinese gold jewelry demand improved somewhat in Q1 2017, but this was when Chinese economic growth was strong.

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Source Idexonline