As Western governments and numerous consumers boycott Russian goods, scarcities look inevitable.
The diamond industry showed mixed signs in May. US retail demand was relatively strong, despite concerns about inflation. Shortages supported the trade as Russian goods became hard — or sometimes impossible — to obtain and sell. However, coronavirus-related disruptions in China and the continued uncertainty arising from the Ukraine war kept sentiment in check.
Smaller and low-quality diamonds were in especially tight supply, since many of those items usually come from Alrosa. Western sanctions on Russia have limited the miner’s ability to sell in its normal way. Sightholders clamored for inventory at De Beers’ May contract sale, market insiders said.
The RapNet Diamond Index (RAPI™) for 0.30-carat stones rose 0.5% between May 1 and 24, but larger sizes dropped. The RAPI for 0.50-carat diamonds fell 0.2% during the period, and the 1-carat index went down 0.5%. Prices for 3-carat goods declined 0.7%.
India’s summer slowdown was more intense than usual, as it was hard to fill factories with raw material.
“Rough-diamond demand in the coming cycle will be affected as usual by the closure of many diamond-polishing factories in India for the traditional May holidays,” De Beers CEO Bruce Cleaver said, referring to the upcoming June sight. “Meanwhile, diamond businesses are also continuing to closely monitor the effects of Covid-19-related lockdowns in China, and the war in Ukraine and associated sanctions.”
Sarine Technologies, which supplies rough-mapping and cutting equipment to manufacturers, predicted a drop in polished production, especially in the smaller sizes. While the market was normal in April, the geopolitical pressures started taking effect in May, particularly for customers that buy from Russian sources, Sarine CEO David Block reported.
“I’m not sure [I] can say there is a significant slowdown, but there is a slowdown — part of it probably because of the vacation, part of it because of Russian goods,” Block told Rapaport Magazine in mid-May, citing data from the company’s stone-scanning systems. “I would probably expect to see more of a slowdown going forward as inventories of rough that were in the safes…start to peter out.”
US vs. China
The US trade was focused on the upcoming Las Vegas shows, with enthusiasm levels high following two years of limits on exhibitions. Record inflation dented sentiment somewhat, but jewelry was still outperforming other sectors. However, measures to curb the spread of Covid-19 in Shanghai and other Chinese cities undermined consumer spending in that region.
Article from the Rapaport Magazine – June 2022. To subscribe click here.