Dubai’s diamond market hit by global downturn

The price of 1-carat laboratory-graded diamonds has declined 15.3 percent since July last year, including 0.9 percent in June, according to the index.

Diamonds of 0.3-carat have fallen the most, losing 10.6 percent so far this year and 25.8 percent in the past 12 months. Meanwhile, 0.5-carat diamonds have declined 17.5 percent in the past year and 3-carat diamonds are down 18.1 percent.

The popular stone has been trading at “steep discounts”, RAPI said, contributing the loss to “relatively quiet” demand in the US and “cautious” demand in the Far East.

“Diamond manufacturers are under pressure and continue to lose money on their rough supply,” RAPI says.

“Manufacturers’ profit margins are being squeezed between stable rough diamond prices and declining polished,” the report says.

“There is a shortage of fine-quality diamonds and selective buyers are paying firm prices for these goods to fill existing orders. However, there is a lot of excess inventory of lower-quality diamonds in the market and flexible inventory buyers are getting good deals.”

The Dubai Diamond Exchange, based in DMCC, is the third largest diamond trading hub in the world, trading about $29 billion worth of the commodity in 2013, according to its website.

The exchange has seen strong growth in the trading of rough diamonds, up from about $3 billion worth of trade to $13 billion between 2009 and 2014, according to the Dubai Diamond Exchange website.

The RAPI report, said rough diamond producers were particularly hard hit by the weaker prices.

“Rough producers prefer to reduce supply rather than prices in the current weak market,” the report says.

“Rough prices remained relatively stable in the second quarter after slipping an average 5 percent to 7 percent in the first three months of the year.

“Manufacturers are expected to further reduce their rough purchases in the coming months in an effort to shrink existing inventory and raise liquidity levels.”