By Courtney Trenwith
The price of diamonds – in which Dubai is the world’s third largest trader - has fallen by as much as 25% in the past year, according to the latest report
Dubai’s diamond market has been hit by a global downturn, with prices falling by as much as 25.8 percent in the past year, according to the RapNet Diamond Index (RAPI).
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.”
That is ONE SIDE of the equation, which is, indeed, a REAL problem.
It is TRUE that rough diamonds have silently been stockpiled for years in Africa in order to keep the price high.
NOW, though, it is HIGH TIME to SELL!
But even still, Suppliers are NOT getting the prices they expected.
Furthermore, Dubai, specifically, is not paying what the Sellers want, but is offering a price substantially lower.
It is a real tug of war going on in the Industry currently.
To ADD fuel to the fire: the LUXURY MARKET is NOT marketing DIAMONDS as much as other commodities, like luxury cars, real estate, paintings, antiques, whatever it be...
so the RETAIL MARKET is ALSO hurting
as well as the WHOLESALE side.
It is a MAJOR CONCERN for all in the Industry
and the latter was the SINGLE GREATEST CONCERN of participants in the Dubai Diamond Conference this year.
It has yet to sort itself out.
The path is not yet clear cut.
These are market forces at their best at work, to be sure!