RAPAPORT... There seem indeed to be some positive signs appearing in the diamond market — small as fledgling spring flowers peeking out of the winter-bare landscape. They hint at the fact that there might be a future after all, even if nobody knows when exactly it will arrive.
Henri Keesje of Keesje Invisible Settings elaborated: “Business seems to have resumed slightly. That is, the phone has started ringing again, and small and very specific orders are being placed by our clients for stones across the board. It’s definitely better than January or February, which gives us a gleam of hope in the ambient darkness.”
Select Goods Selling“Another sign of this fragile recovery that should be noted,” Keesje continued, “is that Israeli buyers are coming back to Antwerp for the rough, which is a good thing for the stabilization of the market. Basically, I think I can safely say that our clients abroad are still complaining and are not yet ready to replenish their inventories, but tailor-made sales of select goods are definitely coming back.”
Noldy Grossmann of Grossmann Diamond Manufacturing has a more tempered view, although he also has noticed some resumption of activity. “There’s indeed a little more movement, although it is very targeted,” he said. “The market is definitely more active than it was during the first two months of 2009, which were dead months. It might be more accurate to say that March was a little less dead, but the improvement really was too small for us to be speaking about the resumption of business. Nobody knows when the retailers are going to decide that the time has come to refurbish their stocks.”
Grossmann added that “The good news is that we sold more than expected at the Hong Kong show. I expect that the Basel show will give more indication of the climate of the industry or at least a good indication of the mood of the market, especially in the smaller goods range.”
To Restock or Not?Although he also has seen shy movements in the market, Bruno Gerits of Lazare Kaplan is not overly enthusiastic. “Customers have needs and are again placing orders, that’s true, and it is important. However, I wouldn’t call it a real improvement. Compared to what we used to do at the same period during previous years, we’re still at less than 50 percent of the old turnover. The general mood is bad, but surprisingly, rough is moving relatively well.”
“Diamantaires are now facing two choices,” he said. “Either they pull the trigger, make a decision, take their loss and move ahead with a clean slate, or they wait for better times in the hope that they will recover their losses. Nevertheless, for those who have very big stones, the losses are substantial and they are going to be terribly difficult to offset.”
Sounding a positive note, André Gumuchdjian of A.V.Gumuchdjian said, “I strongly believe sales will resume in the very near future. In my opinion, our very low current turnover is no more than a technical consequence of the fact that the retail level has lost some 20 to 25 percent of its turnover.
Consequently, the retailers have been attempting to manage their stocks more efficiently and reduce or postpone their purchases. We’re now at about the five-month point since the drop in retail sales first impacted our level in the pipeline.”
Looking ahead, Gumuchdjian offered the prediction that “Unless retail sales continue to drop, there’s a good chance we will see our business resume in May or June in time for the Vegas shows. What we must bear in mind, though, is that the U.S. will not live anymore in its financial bubble, miles away from the real economy. When purchases do resume, our industry shouldn’t expect to regain the crazy levels we knew in the past before the crisis. One of the very encouraging aspects of the current situation is that the prices of the polished are very likely to rise very soon, the reason being the shortage of rough. Indeed, the global policy of reducing diamond output seems to be bearing fruit because, for some items, the supply already is too short. Prices are definitely more poised to go up than down. Having said that, now seems to be a fine moment to start buying rough — that is, if you’re liquid enough, of course.”
Keeping Hope AliveEven though it’s not universally agreed that diamond business is resuming, there’s a kind of a general understanding among those in the market that something tiny and hopeful is in the air for the diamond industry. But it is important to keep any and all market improvements in perspective.
“If the market was to grow now by 200 percent compared to January, it would be interesting and diamantaires would be pleased,” said Grossmann. “But let’s not forget the example of Citibank, whose stock, which was at $1.03 on March 7, appreciated by 226 percent in just ten days to hit $2.33 on March 17. That may sound good, but you have to remember that the same share was worth $27 in March 2008 and about $55 the year before that.”
The Marketplace
Rough• Sales are picking up slightly across the board.
Polished• Demand is slowly picking up for H-J, VS-VVS but it still is not strong enough to indicate a real trend.
• Generally speaking, people are focusing more on the bottom line — profit — than on the top line — turnover.
Article from the Rapaport Magazine - April 2009. To subscribe click here.