Diamond market mood plummets to 2008 levels

Diamond prices fell again in July as market sentiment slumped to levels not seen since the 2008 downturn, according to the latest report from Rapaport. The report said that manufacturers rejected large quantities of rough supply as trading and manufacturing activity plummeted. It said that rough prices are unsustainable due to the “significant” gap between rough and polished prices. Rough prices are “likely to fall even further” in August as sightholders are preparing to refuse unprofitable rough. The RapNet Diamond Index (RAPI) for 1-carat laboratory-graded diamonds fell 2.5% in July. RAPI for 0.30-carat diamonds declined 6.3%, RAPI for 0.50-carat diamonds dropped 4.7% and RAPI for 3-carat diamonds decreased 1.7%. During the first seven months of the year, RAPI for 1-carat diamonds fell by 2.8%, and was down 14.1% from one year earlier on August 1. According to the monthly report, polished inventory levels remain high. However, there are shortages in select goods due to significant decline in manufacturing. It said that cutters, which usually make large-scale rough purchases in July and August in preparation for Christmas, are refraining from doing so this year. Manufacturers are refusing to buy rough that cannot be polished at a profit because both rough prices and polished inventory levels are too high. The report said De Beers will allow sightholders to defer up to 75% of their August purchases after they rejected an estimated 65% of goods at the July sight. The sight closed with an estimated value of $200m (£128.3m) - a seven-year low for an individual sight. Manufacturers appeared content to stay out of the rough market as they try to diminish their large polished inventory, while jewellers will be getting their supply for the holiday season mostly from existing excess polished inventory, rather than from rough, as there is almost no new rough entering the system. In a statement the report said: “Rough prices must drop significantly to enable manufacturing – and [the] mining sector – profit growth, and lift the general market from its current crisis.”