Playing with Figures: India and Botswana are Winners
August 26, 04 by Chaim Even-Zohar
Some people are addicted to dope or cigarettes. They know these things are no good, but they can’t keep away. I have a similar problem with diamond statistics. The longer I cover this business, the less I believe in them. Nevertheless, I spend hours analyzing them. What I look for is trends and deviations, assuming that the same types of errors will repeat themselves and then the changes become significant. The United States has better statistics than many other countries. In the first 6 months of this year, the U.S. imported $6.7 billion worth of polished diamonds, which was 15.5% higher than in the first half of 2003. In terms of carats, polished imports declined by 2.6% to some 8.99 million carats.
What we really care about is prices. In this respect the average per carat price of U.S. polished imports rose by a hefty 18.5% from $630 p/c to $747 p/c. It is nice to recall that De Beers’ chief Gary Ralfe has noted that the DTC’s rough sales prices were 14% higher in the first half of 2004 than in the corresponding period last year. But the DTC sells a full range of goods; the types of polished imports into the United States are subject to trends. So these figures are not automatically connected.
The trends are fascinating. Imports of polished diamonds of 0.5 carat and up (larger goods) rose 18.7% to $5.35 billion in the first six months. In carats, the growth was less, some 7.8%, so, yes, there seems to be a real strengthening of prices. The average value of half-caraters and up increased 10.1% from $1,585 p/c to $1,745 p/c. The main difference, however, is the source of the half caraters and up. Israel is traditionally the main source: it supplied $3.19 billion in the first half, which is 19.1% more than last year. The average prices of these goods rose by 16.8% from $1,788 to $2,087. Imports of comparable sizes from Belgium rose by 5.6% to $1.17 billion, but, remarkably, its export prices rose from an almost identical average of $1,789 last year by only 7.7% to $1,927. Why is that? I don’t really know – the goods may not necessarily be the same but that alone would not account for the substantial differential.
But Israel and Belgium are not overly relevant in this analysis. India is! In the larger sizes (0.5 carat and up), the U.S.A. increased its imports from India by 35.8% in value to $504.2 million and 27.5% in carats. This represents the greatest half yearly growth in exports of larger diamonds in the history of India. In terms of average values, these goods are still sold at a far lower price level, reflecting a different distribution of size ranges and, of course, different qualities. However, compared to the first six months of 2003, India’s average values in this category rose by 6.5% from $611 p/c to $651 p/c. This success causes us to look at overall imports of Indian diamonds into the United States. These went up 14.4% by value, but went down in terms of carats, registering a decline of 3.1%. (That means that something significant must be happening in the smaller, so called Indian, traditional qualities. In carats, still some 80% of all U.S. imports of goods below half a carat originate in India; 9% comes from Israel.) In value, however, India’s exports to the U.S. in the smaller goods went up 5% to $882.1 million in the first half of 2004. In terms of average values, in these smaller goods, the average price went up 12.5% from $165.65 to $186.41. The decline in total caratages must be linked to the decline in the availability of the cheaper Argyle qualities. This only shows that if supplies dwindle – and unemployment in the cutting factories increases because of fewer goods – the prices happily move upwards. No, this is no plea for a return to a supply controlled market with buffer stocks – but one must admit that the system had great advantages. “Legal compliance” is worth a lot – it doesn’t necessarily increase the bottom line in the short term. [In the long term, I was told, it will.]
So India is definitely a winner in the first half of 2004.
There are also interesting trends on the rough diamond side. The removal of Sightholders shows that imports of rough from the United Kingdom went down by 43.9% from $31.6 million in the first half of 2003 to merely $17.7 million in the corresponding period this year. But the craziest statistic remains South Africa. According to the U.S. Department of Commerce, the U.S. Treasury, and the U.S. International Trade Commission, the U.S.A. imported $240 million of rough diamonds from South Africa. This amount equals 67% (two-thirds!) of total rough diamond imports into the United States. That is impossible. We know that this figure is totally wrong. Actually, it has gone up this year by 20.5% compared to last year. We have anecdotal evidence that some custom officials, when presented with a bag of diamonds, simply jot down South Africa as the source – even though the goods may have come from Israel or Belgium. But in the day and age of Kimberley, that should not be possible. It’s going to be “great fun” when the Kimberley Peer-review experts come to the United States to check on $240 million worth of imports which would require a South African Kimberley certificate. This is not the first time that we have noted problems with the U.S. Kimberley system – but nobody seems to really care about these flaws, so let’s change the subject.
Let’s look at exports of polished diamonds from the United States. These exports are up by some 23.80%, which is far more than the increase in imports. That means that “fewer diamonds” imported into the United States actually stay there. And where are these exports going? By value, some 63% are destined for Israel and Belgium. That means “return shipments”, that means “unsold goods” – that can even mean payments of sold diamonds in goods, rather than money. Payment from a jeweler who had sold the diamonds (given on memo, consignment, or credit), but lacks the liquidity to pay with money. Polished exports to Hong Kong went up by 45% to $306 million in the first half of 2004, to India 61% (!) and to the U.K. by 50%. But in absolute terms these figures are small.
Statistically, other great winners are Botswana and Angola. Rough diamond imports from Botswana increased by some 840% to $23 million. It is interesting to find out who would be selling rough directly to the United States – maybe the factories? Angola is also back on the import map: in the first half of 2004 some $13.8 million came from this source against virtually nothing in the corresponding period last year. As I said at the outset: my faith in these figures is rather limited. At least you can see why. But they do make for rather amusing reading.