The price of polished diamonds continued to rise in February continuing the uptrend since November, according to new figures.
The latest RapNet Diamond Index (RAPI) from the Rapaport Group said the market was supported by continued shortages, while trading slowed during the month as dealers in China and Hong Kong took vacations during the Chinese New Year period.
The index for 1-carat GIA-graded diamonds and 0.30-carat diamonds rose 0.3% and 0.4%, respectively, while 0.50-carat diamonds grew 0.7% in February.
The price for 3-carat diamonds fell 1.2%, while RAPI for 1-carat diamonds increased 1.3% during the first two months of the year but remains 7.8% below levels recorded one year ago.
The report said the uptrend in polished prices is being driven by shortages rather than growth in demand. It said manufacturers increased their rough purchases and polished production in 2016 in order to fill shortages in the polished market.
However, it said scarcities remain in the short-term as it takes three to four months for new polished production to enter the market.
There has been some restocking of inventory among manufacturers in January and February, but the report said rough trading is expected to slow as new polished supply enters the market in the second quarter, while polished demand is expected to remain sluggish.
Martin Rapaport, chairman of Rapaport, issued a cautionary statement regarding the impact of increased supply on polished prices. He said: “The recent surge of rough diamond prices on the secondary market is dangerous and unsustainable.
“Current polished price levels reflect artificial shortages created by a 42% decline of rough supplies in the second half of 2015. Production is now normalizing which will soon significantly increase polished supply while overall demand remains weak.”