Polished diamond trading was seasonally slow in July as the US wholesale market closed for summer vacation. Polished prices softened as midstream inventory levels increased due to the slowdown in demand and increased supply.

The RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded, RapSpec A3+ diamonds fell 0.7% during July, and was down 3.2% since the beginning of the year.

The Rapaport Monthly Report – August 2017 notes that manufacturing profit margins have come under pressure since rough prices increased an estimated 3% on average in the first half of the year, while polished prices softened.

Excess rough inventory has shifted from the mining companies to the manufacturing sector. Rough sales at De Beers and Alrosa exceeded their production by a combined 7.9 million carats in the first half. Manufacturers have absorbed that rough, and their polished inventory levels have grown significantly as a result. The number of diamonds listed on RapNet increased 23% since January to 1.47 million unique stones on August 1.

While rough demand slowed slightly in July, manufacturing levels are expected to remain high until factories in India break for the Diwali festival on October 19.

Polished diamond buyers are selective, as demand has slimmed to narrower ranges. Jewelry retailers are careful not to buy stock they cannot move. US jewelry sales-growth is being driven by smaller chains and independents, while the major retailers are struggling to adjust to changing consumer trends. Sales in China and Hong Kong have begun rising again after prolonged declines, providing some optimism ahead of the fourth-quarter holiday season.

Polished trading is expected to remain slow in August as dealers in Belgium and Israel take their summer vacations. Demand, meanwhile, is expected to improve and support polished prices from the September Hong Kong show onward, as retailers prepare for the holiday season.