The diamond industry finds itself in a difficult economic situation: the demand for raw material, as well as diamonds, falls each year. One of the main causes for these global problems is the diamond surplus. Traders found themselves holding onto excess raw material, while the supply of diamonds far exceeded the international market demand.
Nevertheless toward the end of 2020 the market slowly recovered. Largest players in diamond retrieval had no choice but to cull raw material sales, as to create a necessary deficit of goods and help reduce the surplus. In recent times we are seeing a reduction in diamond shipments. For example, the company De Beers shrunk their imports to 45%.
Usually site owners, or large buyers of diamonds must buy at whatever price and quantity is offered to them by De Beers. However recently instances of rejection or even return of raw material have surfaced.
Along with the lowered raw supply, the amount of new diamonds on the market fell too. Let’s go to the largest cutting center in the world, which can be found in the Indian city of Surat. Housing over 800,000 employees, the cutting is done with the utmost modern equipment.
The country is undergoing a tightening of bank lending, which lowers the possibility of attaining raw diamonds for processing. This leads to a shortening of “dead” supplies benefitting the entire industry. Precisely bank politics in large part helped stimulate India’s cutting industry, allowing entrepreneurs to buy up goods and become leaders in precious rock processing.
Of course, past celebrations in India helped alleviate the situation. Since many large factories were closed for three weeks between October and November, supply temporarily fell.
All this occurs under market laws: supply has to contract, a painful blow to the field’s benefactors. All that’s left is to stimulate the demand. Political complications should also be kept in mind. Whether we like it or not, the diamond market depends on its two biggest customers: USA and China.
In September 2020, one of the most important for the jewel and precious mineral industry exhibitions was held. Hosted in Hong Kong Jewelry and Gem Fair, the show had record low participation. This was due to anti-government protests, which hurt local sales. Many businesses had to close temporarily. Accounting and statistical departments showed disheartening data: the revenue from jewelry, watch and other expensive gifts in Hong Kong fell 41% from the previous year, down to $436.6 million in September. This rapid retraction of the Chinese yuan has lowered demand for a period of time: locals opted for cheaper rocks with lesser characteristics. The overall economic growth of China continues however, although at a slower tempo.
On September 1, 2020 Chinese jewelry, diamond and metal exports to the US enjoyed a newfound 10% spike in supply, which caused caution among American customers. However the stable demand for 1-1.5-carat wedding rings supports the market. Back in 1938 De Beers hired the Philadelphian advertising agency N. W. Ayer, whose work sparked the emotional value for the at the time low-demand diamonds – “a diamond is forever”. Brilliant! Thus N. W. Ayer convinced men and women alike that a wedding is impossible without a diamond-studded ring.
Overall, despite the fears, American purchases during the festive period of 2020 – Thanksgiving, Black Friday, Christmas – turned out stable and did their job. Actual advancement, however, requires change and sustainability. And this is easier said than implemented.