The RapNet Diamond Index (RAPI™), a leading global diamond pricing index, reported a 2.4% drop for 1-carat polished diamonds in April.
This decrease has brought the index down to 7,159 as of May 1st, compared to its 7,543 standing at the start of the year.
Diamond prices across other sizes also exhibited weakness, with only 0.30-carat diamonds showing some stability.
Dampened Demand in Major Markets
This downturn in diamond prices is primarily due to sluggish demand in the US and China, the world’s leading markets for diamond jewellery.
Avi Krawitz, Senior Analyst at Rapaport, explains, “Polished trading was quieter than usual in April. Economic uncertainty stemming from the rise in consumer prices over the past year has impacted discretionary spending and discouraged retailers from buying inventory.”
Retailer Strategies Amid Uncertainty
In response to this uncertain market, US jewellers have cut back on bulk purchases, opting instead to focus on memo to avoid accumulating excess goods. Simultaneously, Chinese buyers are proceeding with caution due to economic prudence on the mainland. While retail in Hong Kong is seeing improvement, bolstered by a revival in tourism, a slowdown in trading indicates restraint among Chinese dealers.
Rising Inventory and Limited Supply
Interestingly, the level of midstream polished inventory continues to rise, even as manufacturing levels have fallen.
Polished production is considerably below capacity, with restrictions on Russian supply limiting the availability of rough diamonds. In India, the largest diamond manufacturing hub, rough imports for the first quarter were down 22% year on year to $4.26 billion.
The Market Outlook
Despite these challenges, dealers remain hopeful for a lift in sentiment and boost in demand in the second half of the year, with the upcoming Las Vegas shows expected to play a crucial role.
However, the diamond trade has had a rough start to 2023, and the Las Vegas shows will serve as a litmus test for the state of the crucial US market.
Implications for UK Jewellers
For UK jewellers, these global trends could have several implications. The reduction in diamond prices might present an opportunity for jewellers to stock up on diamonds at a lower cost. However, this must be balanced with the risk of owning excess inventory in a potentially uncertain market.
Furthermore, the caution exercised by US and Chinese buyers could also be a prudent strategy for UK jewellers. Shifting focus to more flexible models like memo could offer a more adaptable approach in the current environment.
Finally, the challenges faced in the global diamond market underscore the importance of staying informed and prepared. UK jewellers should keep a close eye on upcoming events like the Las Vegas shows for any indications of a shift in market sentiment and demand trends.