Following a subdued trading year for the global diamond industry in 2019 owing to the US-China trade war amongst other factors, the multi-billion dollar lucrative business is set for steady recovery in 2020. This is according to Rapaport Group, a US-based diamond industry think tank.
In a communiqué dispatched from Las Vegas last Tuesday, the company shared that Diamond market conditions improved in December as US and Chinese holiday demand helped raise sentiment. Polished prices stabilised and improved for sizes under 1 carat, supported by shortages of G+, VS2+ goods. However, high-end qualities (F+, VVS+) of 3-carats and larger diamonds remain weak, according to Rapaport’s RapNet Diamond Index, 1-carat diamonds slid 0.2% in December and 5.3% for the full year. The index for 0.30- and 0.50-carat stones ﬁrmed in the fourth quarter following steep declines early last year.
The Rapaport report observed that the market in 2019 was supply-driven, an oversupply of diamonds set a negative tone, leaving the trade with numerous diamonds that were difficult to sell. Inventory levels declined in the fourth quarter of 2019, but there were a lot of lower-quality goods still available at the end of December. The Las Vegas diamond dealer further says the year also saw a change in consumer patterns, with multi-channel jewellery shopping and online diamond trading gaining momentum.
“That gave buyers access to larger inventories and more information about the goods, enabling them to cherry-pick the best-quality stones, leaving the trade with large quantities of less desirable merchandise.”
The industry in 2019 also endured tight manufacturing profits, a reduction in bank credit, and cautious Far East demand resulting from uncertainty about the US-China trade war and Hong Kong protests.
De Beers’s low sales
The year 2019 presented a difficult sales path for many companies including diamond mining giant De Beers Group, which saw sales of polished diamonds plummet by about $1.36 billion. In 2018, De Beers’s rough diamond sales amounted to US$5.39 billion, approximately P54 billion, a slight hike from the 2017 sales value of US$5.31 billion. For the year 2019, the company‘s entire ten cycles only gathered total sales provisional value of US$4.04 billion, way below the 2018 value by about $1.35 billion (around P14 billion), constituting a 25 % decrease.
Following the 2019 revised full year production guidance to approximately 31 million carats of diamonds down 11% from 35 million last year, De Beers’s parent company, Anglo American further cut its diamond production forecast for the next two years. In 2020, it expects De Beers will mine 32-34 million carats, down from its previous outlook of 33-35 million. For 2021, the forecast was cut from 35-37 million carats to 34-36 million carats. Production guidance for the full year of 2022 is 33 to 35 million carats. De Beers, however, closed the year with slight signs of recovery with their 10th cycle registering improved sales when compared to the previous cycles during the year.
The 2020 Recovery
Going into 2020, Rapaport says there is some optimism for the new decade. The company says the industry can expect lower rough supply, market consolidation, and further changes to the way diamonds are bought and financed as well as greater use of technology. Rapaport further predicts that there will be more emphasis on ethical sourcing and the segmentation of lab-grown and natural diamonds into distinct markets.
According to the Las Vegas-based diamond experts, to navigate these trends and bring about an upswing in diamond prices, the industry must invest in marketing and develop more efficient processes and inventory management.
“Diamond jewellery sales must outperform the last decade’s and should exceed $100 billion by 2030,” forecasts Rapaport.
The Rapaport Group is an international network of companies that provide value-added services that support the development of ethical, transparent, competitive and efficient diamond and jewellery markets. Established in 1976, the Group has over 20,000 clients in over 121 countries.
Group activities include Rapaport Information Services, providing the Rapaport benchmark Price List for diamonds, as well as research, analysis and news; RapNet – the world’s largest diamond trading network, with over 15,000 members in 97 countries and daily listings of approximately 1.3 million diamonds valued at approximately $7.4 billion. Part of the Group is also the Rapaport Laboratory Services, providing GIA and Rapaport gemological services in India, Israel and Belgium; and Rapaport Trading and Auction Services, the world’s largest recycler of diamonds, selling over 500,000 carats of diamonds a year.