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By the State Diamond Trader

The diamond industry is undergoing a significant period of change as pressure mounts from various fronts. The challenges are mostly characterised by the rise of lab-created diamonds, geopolitical instability, changing consumer mindsets, a rise in environmentalism, and global economic inflation.

The global diamond industry in a state of depressed demandGlobal diamond market conditions continued deteriorating through the year due to micro and macro-economic factors. External to the diamond industry has been the rise in global inflation triggering surging interest rates in most economic regions. The combination of these economic factors has weakened consumers’ disposable income.

Notably, in 2022 lab-diamond jewellery surpassed the 10% mark of total global diamond jewellery sales for the first time. This figure is expected to expand as lab-diamond jewellery sales are forecast to continue growing at an annual double-digit percentage rate in the coming years. That said, in the medium and longer term, lab-grown diamond sales as a percentage of natural diamond sales will likely be less as production of these increases and prices drop.

The natural diamond industry has also been negatively impacted by the rise in popularity of lab-grown diamonds. The threat of such an alternative market is a major contributor to falling prices, disturbance of supply and demand, and creates general confusion in the minds of the millennial consumer.

Consequently, the natural diamond industry has been overburdened by the inability to dispose of polished inventory prior to the downturn in the market. A leading diamond producer was reportedly combining its near-term sights, thereby reducing the number of sales in 2023 owing to the lackluster market demand for rough diamonds. As a result of the softened demand, another diamond miner deferred its Tender from June until August, hoping for stronger seasonal demand. This follows the withdrawal of a portion of its Tender 5 goods in May 2023, which were predominantly higher-value goods.

Despite challenges and interventions from the major producers, the festive season presented the industry with a lot of optimism, together with the anticipation of the Chinese New Year and Valentine’s Day sales preparations. However, the global diamond industry finds itself in a precarious state, following the weak 2023 Hong Kong Jewellery and Gem Show, albeit the activity was in line with participants’ low expectations, the reality is that there is weak mainland demand amid an economic slump.

According to Rapaport, (a provider of independent diamond and jewellery industry news and analysis) suppliers reported minimal sales of polished under 5 carats. Larger, high-value stones saw some movement, as high-end brands and wealthier consumers continued to buy, but these deals were still limited, exhibitors said. Smaller Asian markets such as Singapore and the Philippines offered some sales. This puts a strain on the market as the Hong Kong show is generally viewed as the market check for events leading up to the festive season.

In general, trade in different diamond centres is challenged and under extreme pressure. India, a major diamond processing country, considered halting rough imports for a period of two months ending December 2023 in the hope of alleviating the polish inventory in the diamond pipeline.

Rough production

The G7 countries account for almost 70% of the world diamond jewellery consumers market and are in the process of introducing mechanisms to stop the flow of Russian diamonds from entering G7 countries as of January 2024. Industry players are concerned that this will be parallel to that of the Kimberly  Process mechanism. Alrosa, the Russian rough producer accounts for about 30% of global rough production. This development has been met with mixed sentiments in the market globally and it remains to be seen whether supply disruptions will make any reasonable impact on rough diamond prices, market stability and the supply and demand curve as it pertains to the natural rough diamond industry. This development, some might argue, is not what the diamond industry needs at a time when the industry is experiencing the current sluggish state.

Forecasting

There remains an important need for differentiation between natural diamonds and lab-created ones. To counter the negative impact of the lab-grown ones, the natural diamond industry has to employ an aggressive marketing approach, but that will require a significant increase in necessary spending on this critical aspect.

The natural rough diamond industry must improve supply chain transparency, provide traceability, and promote responsible sourcing mechanisms that will drive consumers’ confidence and understanding that natural polish diamonds are an investment purchase.

The price and commodity correction will require collaboration throughout the diamond value chain, ensuring that all the players in the different streams act responsibly and allow for profitability throughout. The natural diamond industry has shown its resilience over the years in the face of adversity.

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Editor
Nellie Moodley 
Email: mining@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

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Rynette Joubert
Email: rynettej@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108


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