US Demand — Only “Slightly Down”?

Diamond Trading Company managing director Varda Shine’s recent speech at the Hong Kong Show had a bit of news and interesting comments .. Some highlights — first on the subject of demand …


.. I would remind you that before the Lehman Brothers story broke we had already seen an improvement in consumer sentiment in the US and a strengthening dollar.


Despite the challenges, sales in the US have remained steady so far this year … with low single digit falls in terms of retail value.  Some mid cost retailers are finding the market tough; but higher end retailers and high volume-low margin chains are reported to be doing better.


Of great importance, the performance of bridal jewellery in the US remains positive.


Given this backdrop, we don’t see a sudden change in US diamond jewellery consumption and believe the year will end only slightly down on 2007.

From my vantage point in the U.S., I am little more pessimistic. These comments were made, I should note, as the current financial crisis was just beginning. More from Varda …


Across the world the picture is also mixed. Western markets are generally seeing low digit declines, while in other markets, such as China and India, retail sales have mainly held up. We anticipate that the remainder of the year will follow this pattern and 2008 will end at a small value positive.


I would be pretty impressed, if that happens.   She also notes:


The world has changed significantly since I was last here in 2006. But diamonds have remained a constant.  Diamond jewellery has grown at modest levels: in line with inflation.  In fact, in real terms, diamond prices have remained quite flat over the last 20 years.  Or put another way: diamonds haven’t “suddenly” become more expensive. Consumers are getting more for their money.


That’s obviously not a good thing. But stepping back, if you think the last 20 years are the period where the De Beers cartel truly ended, and many worried that would lead to a price collapse, it’s probably not the worst thing in the world.


Shine also says  …


What we have seen in the recent past have been speculative prices on rough diamonds driven in part by genuine scarcities on the market.  But the speculative element is starting to recede … leaving us with the fundamentals.


And finally there is this …


The DTC is now a family of companies, stretching across Southern Africa to London to Canada, supporting a unique collection of diamond companies spanning four continents and, between them, accounting for some 75% of global rough diamond purchases.


A little surprising, considering for quite a bit now they have been telling us that their market share is down to 40 percent. Am I misreading something here?

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