Average diamonds suffer in the market as a result of consumer confidence is down. Polished prices weakened after a slow holiday season. Meanwhile, the rough market did wake up in anticipation of after holiday retail restocking. The entire diamond trade faced the same challenges at the start of the year after mediocre US holiday season. This highlighted a need for companies to differentiate themselves in an over-saturated market. With continued consolidation expected in 2017, both among jewelers and diamond dealers, diamantaires are weighing their options while realising that demand has narrowed to satisfy certain growth segments.
"The market is changing and the category if the product is shifting to lower price points that sell every day or to the very high-end," said Carlo Quadri Mariani, owner of Mariani, a Milan, Italy-based jewelry wholesale supplier to high-end retailers. "The middle range is struggling because the economic situation hit the middle class hard, not only in the US, but across the globe." Many anticipate the middle-income segment will remain under pressure due to political uncertainty as the Trump administration adjusts to the governing the country. and with the elections taking place across Europe. Roberto Coin, the owner of the brand that carries his name, stressed it will take some time for the economy to settle down and for the politics "to recover some logic," he told Rapport Magazine at the VicenzaOro fair that took place in January. "I'm more confident for 2018," he added.
Polished Prices Soften
Diamantaires expressed similar caution as diamonds suffer even as they anticipate a rise in demand in the first quarter as jewelers start to replenish stock sold during the holiday season. Whole major retailers experienced a difficult season, smaller independents enjoyed slight growth over the previous year. Signs that jewelry retail sales in mainland China were starting to improve helped improve the mood ahead of the Chinese New Year that began on January 28th. Company Chai Tai Fook and LukFoot holdings, two of the largest jewelers operating in China.
Sales were reported to have increased in China during the third fiscal quarter that ended on December 31, 2016. with gem set products outperforming gold ones. Their respective performances on the mainland China somewhat compensated for continued weakness in Macau and Hong Kong respectively. Diamond trading improved in January but dealers expect the postseason spike to gain momentum around the Hong Kong International Jewelry Trade Show that begins on February 28th. At the moment profit margins among dealers continue to be tight as polished prices softened while rough prices strengthened.
India Hurting
Diamonds suffer even more as demand for melee and lower quality diamonds remained weak in India due to the tight liquidity imposed by the Modi government. The government reduced the cash through its demonetization program that eliminated high-value currency notes in favor of smaller values. As demand decreased, inventory levels increased. To counter this phenomenon Indian diamond manufacturers reduced their production outlet in order to cope with increased inventory. This decline in demand has mostly affected smaller, independent dealers and manufacturers as less jewelry is being purchased and produced.
Hurt Margins
There were shortages in select categories. Manufacturers levels were restrained in the fourth quarter as diamonds suffer yet another setback. Due to the demonetization program, India is currently experiencing, productions levels are down, the result being a shortage of goods. This has led the market disconnected with production almost halted. One diamond sight holder said, "most manufacturers are quite unhappy. At the beginning of last year, there were margins.
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