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ROUGH MARKET

As far as the rough market is concerned the overall picture is that of continued strong demand, with premiums on producer goods having increased sharply since the start of the year. However, this is reportedly not the case for cheap Argyle and small or MIBA (DRC) type material. Historically, demand for the lower end strengthens when consumers start reigning back on spending, which has clearly been the case in the US. This does not seem to have happened so far. Taking into account the fact that Argyle output is considerably lower due to the underground investment, traders are confused why prices have not followed the overall strong demand in rough. Increases in the labour costs for cheaper goods in India due to the strengthening Rupee against the dollar could be a factor. But some traders are pointing at a wider problem, saying a correction in rough is looming. The fact polished is lagging behind sharply in relation to rough and evidence of a weaker sell through at retail in the main US market, also suggests rough will have to give up some of the sharp gains made since January.



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