Tender Report September 2023
Market Overview:
The rough market continues to be very weak. Due to Indian religious festivals, several buyers were unable to travel in the early part of this week, and some tender houses have recently chosen to postpone sales events altogether.
The reasons for the malaise remain the same; high polished stock levels, high interest rates, a lack of confidence in the consumer markets, the impact of LGD, falling polished prices, coupled with ongoing global economic uncertainty. Some customers report rough prices to be in ‘free fall’. Following price adjustments last month, De Beers we believe correctly held firm with their pricing but allowed flexibility, providing Sightholders the opportunity to reject part of their allocation. In smaller size ranges this was 30% of goods allocated, highlighting the issue is first and foremost lack of demand.
Representatives of Alrosa were present in Dubai this week meeting clients and announced that they would not be selling for the next 2 months given the weakness of the market. This comes on the back of a swathe of further restrictions on Russian diamonds discussed at the recent G7 meetings. These would consist of a direct ban on purchases, due to take effect from January 1 st 2024, as well as an indirect ban which would be introduced more gradually.
Efforts to restrict the sale of Russian rough have to date this year been broadly unsuccessful. In a step to stem the negativity in the consumer markets, De Beers has put its significant weight behind the promotion of ‘natural’ diamonds by reintroducing its highly successful, A Diamond is Forever campaign.
An additional $20m investment, to bolster consumer demand for the 2023 holiday season will have a particular focus on the important Chinese and American markets. We understand the investment will be incremental to current De Beers brand activity and used to support a broad media mix. Alongside this De Beers announced Lightbox will end its recent foray into the engagement segment, which has been so dramatically affected by LGD particularly in US.
The Hong Kong Show concluded this week. Attendance was reduced as anticipated, with limited orders coming from the Chinese mainland.
TAGS Tender:
We presented a slightly larger tender than recent months, with a particular focus on Large Stones +10.8ct which remain the least affected by negative market sentiment.
All goods were of high quality and a full range of sizes were presented. We welcomed fewer companies than usual, with a little under 100 representatives from all the major centres. As expected, the focus was on Single stones +10.8 which sold relatively well, and we witnessed less interest in the 5gr-10ct ranges, particularly in lower colours and goods producing SI polished. Smaller sizes -3grs sold well, although prices have softened from the peak.
Unfortunately, we were obliged to withdraw a higher proportion of goods than in recent months, which might ultimately be beneficial for the longer term health of the market, but is nevertheless disappointing for those in attendance. We believe there is some evidence we may have now reached the bottom in terms of pricing and would hope to see a slow recovery and improvement in sentiment in the coming months.
TAGS forthcoming tender will take place in Luanda in collaboration with SODIAM between the 3rd - 11th October 2023.
