Diamond market sentiment was soft in March, after the Hong Kong and Basel shows failed to boost trading in a significant way. The first quarter was weaker than last year’s, with cautious retail inventory replacement after the holiday season. The RapNet Diamond Index (RAPI™) for 1-carat diamonds slid 0.2% in March, while RAPI for 0.30-carat fell 2.9%. RAPI for 1-carat declined 0.5% during the first quarter.
The restocking that typically occurs in the first quarter was subdued this year. Jewelers were uncertain about 2019 prospects after a disappointing holiday season. Retailers are also becoming more efficient, with increased customisation and omni-channel sales letting them reduce their in-store inventory. Savvy jewelers are using technology to tap into suppliers’ stock and improve the customer experience.
Polished buyers are selective, filling specific orders and avoiding large inventory purchases. The market remains saturated with diamonds below 0.50 carats and lower-quality goods, putting pressure on prices. The number of diamonds listed on RapNet as of April 1 was 1.53 million, up 5% since the beginning of the year and 23% higher than a year ago. Dealers are selling old stock, since a decline in manufacturing has meant few new goods are coming onto the market.
Rough sales fell an estimated 30% in the first quarter as manufacturers scaled down operations and De Beers and Alrosa reduced supply to support prices. Diamond trading is expected to remain cautious in the second quarter amid industry efforts to restore the balance between supply and demand.
To make the rough market demand-driven again and bring profitability back to the manufacturing sector, rough prices must come down by at least 10%, as outlined in the March Rapaport Research Report. This will let manufacturers start buying rough with a stronger chance of earning a profit.