Diamond industry’s projection before year-end

After a very strong recovery following an industry-wide inventory buildup in 2014-2015 and again after India’s demonetization in late-2016, the diamond industry’s momentum has begun to stall, or perhaps normalize is the proper verbiage.

Here we are little more than half way through 2017, and industry fundamentals are not necessarily negative, but signals are mixed with a subdued tone.

In the industry’s largest market, the U.S., retail diamond jewelry demand is somewhat underwhelming as large national retailers have underperformed so far this year despite a resilient economy and a stock market that seems to make new highs daily. In China, the industry’s second largest market, demand is improving but the market is not thriving.

Rough prices are higher this year, but polished is flat, if not down in some categories, and there are indications that excess polished inventory is building.

De Beers appears to be attempting to curtail excess supply to the market by continuing to raise rough prices while reducing allocations to clients, while Russian-major ALROSA (RTS: ALRS) is increasing production and supply to clients due to “strong demand.”

Demand

U.S. Proxy Signet Jewelers

U.S. end-market demand has been stable at best, with the largest player in the market underperforming as of late. Signet Jewelers (NYSE: SIG) in late-May announced a 8.2% year-over-year decline in same store sales and a 25% decrease in earnings for the three months ending April 30th, after adjusting for the calendar impact of…. continue