Ramat-Gan, Israel--The market is in a recovery mode with traders once again buying and manufacturing rough goods and having positive expectations for the holiday season. In practical terms, there is some trade in rough in the secondary market again, but prices are based on a new, and lower, standard.

The Diamond Trading Company sight last week was small, as November sights tend to be, the smallest sight of the year so far. The DTC has lowered prices de facto, even though it has not done so officially. It did this by improving assortments, mainly improving the size distribution within the boxes.

A look at the DTC price list shows that the prices of many boxes have declined by 1-3 percent, with some dropping by as much as 5.5 percent. However, a further analysis of the content of the boxes shows the size distribution improved by a few percentage points, which was all that was needed for a real price improvement of 5-10 percent.

This is a much needed reprieve for many traders, especially after the prices of polished have declined since August. Despite this, sightholders say that DTC prices are still too high and that the improvement was not enough.

Trading has restarted on the secondary market, although it is still slow. One diamantaire told IDEX Online that, "there is more business but still not enough to help strengthen the market."

With the improved demand, traders are willing to pay more for the goods from the last sight. However, all boxes are still trading at below DTC list prices. The Indian goods are selling for as low as 10 percent below DTC list price, according to one trader.

At the BHP spot market, the October results show a certain improvement in prices compared to September, especially among the 4-8 grainers (for example 4-8gr Z White Low +12.7 percent to $915 p/c). However, even after the recent drop in prices, the goods are some 20 percent higher compared to October 2010. The Spot prices are some 30 percent lower than their peak in July of this year.

What is fueling the improved prices are mainly the Indian manufacturers, who decided to return to work as soon as the Diwali holiday was over, thereby getting the factories in Surat busy as early as possible. Traders are expecting orders in January and February to replenish retailers' stocks, keeping in mind that they have not made large purchases since July.

Another factor is a desire by some to control the average value of their stock by bringing in lower cost goods before the expensive goods are sold, leading to a slower decline in the value of the stock.

Prices will likely gradually improve, but moderate polished prices are expected to prevent runaway business.

This article first appeared on IDEX Online on Nov. 10.

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