RAPAPORT...As the year is approaching its end, trading is becoming more active compared with the relatively slow activity in November. Still, the Christmas and New Year holidays haven’t yet developed into a major diamond selling season in China on the scale of its three “Golden Weeks.”
Jewelry factories in Shenzhen, the major jewelry manufacturing center, are starting to receive orders for the country’s most popular holiday, the Chinese New Year, which begins February 7, 2008. Ample supply meets demand for the regular categories from 10 to 30 points, H to J, VS to VVS. Beginning this year, J color has been encountering rejection in the market. Supplies are short for I color plus, VS plus, 40 to 50 points and bigger, nice stones. Good SI goods are moving, but most demand is still concentrated in the better-quality range.
Strong Demand for Carat Goods
Diamonds 1 carat and larger have been in short supply for quite some time.
Demand has increased noticeably from Beijing, Shanghai and Shenzhen for nice make, H to I, VS to VVS, and D to F, VVS carat goods. Nicely cut SI carat goods are also seeing some demand.
A diamond dealer from Shenzhen said that he sold approximately 40 to 50 pieces of carat goods annually in the past, but now he can sell 50 pieces a month.
Although there has been a price increase of approximately 2 percent since November, the retail sector does not seem concerned because the appreciation of the local yuan currency has offset the price hike.
Economists are predicting that the Chinese yuan will accelerate its appreciation due to China’s rising inflation and a large trade surplus. Consumer prices in October reached their highest in more than a decade, mainly driven by food and real estate. The consumer price index, regarded as a key inflation gauge, rose to 6.5 percent in October year-on-year, up from 6.2 percent in September.
“One of the reasons for the strong demand for carat diamonds is that people buy diamonds as an investment against inflation,” said a diamantaire from Beijing. “Some of my clients made money from the stock market in the first half of this year, and they buy big diamonds and real estate to diversify their investment when the stock market turns down in the last quarter of this year.”
When consumers think inflation is imminent, the impact on diamond sales is quite subtle. Sometimes, an expectation of inflation can work to promote diamonds as a value-added investment. Similarly, the current huge demand for gold bars may indicate a desire to use gold as a hedge against inflation.
Diamond Cert
Both local and international certificates are acceptable in the wholesale and retail of diamonds and diamond jewelry. Although a diamond certificate is not a compulsory item in China, almost every diamond that is bigger than 20 points is accompanied by a certificate.
There are about 80 laboratories and institutions in China issuing diamond certificates, according to the National Standard Commission. The National Gemstone Testing Centre (NGTC) is the most prominent lab in China and is authorized to inspect and check certificates issued by other labs. The National Standard on Diamond Grading is the only standard used in the arbitration of disputes or disagreements about appraisal results.
The discrepancies between the NGTC standard and that of other foreign labs have been a bothersome issue for many diamantaires. In order to avoid unnecessary disputes in the retail market, many retailers send their diamonds that are certified by foreign labs to the NGTC and its local affiliated labs for NGTC certificates, as well.
The NGTC office in the Shanghai Diamond Exchange (SDE) recently increased its personnel and services in order to meet appraisal demand within the exchange.
The Marketplace• 10-per-carat, good make, VS+/H-I, are selling at approximately $630 to $660.
• 6-per-carat, good make, VS+/H-I, are selling at approximately $830 to $870.
• 4-per-carat, good make, VS+/H-I, are selling at approximately $1,100 to $1,230.
• 3-per-carat, good make, VS+/H-I, are selling at approximately $1,300 to $1,400.
• 10-per-carat, good make, VS+/I-J, are selling at approximately $560 to $610.
• 6-per-carat, good make, VS+/I-J, are selling at approximately $780 to $830.
• 4-per-carat, good make, VS+/I-J, are selling at approximately $920 to $1,200.
• 3-per-carat, good make, VS+/I-J, are selling at approximately $1,150 to $1,250.
• 1 point, SI/G-I, is selling at approximately $190 to $230.
• 2 points, SI/G-I, are selling at approximately $270 to $310.
• 3 to 7 points, SI/G-I, are selling at approximately $320 to $380.
• 10 points, SI/G-I, are selling at approximately $400 to $480.
• 15 points, SI/G-I, are selling at approximately $530 to $590.
Article from the Rapaport Magazine - December 2007. To subscribe click here.