As the diamond industry deals with a decrease in the prices of small-sized stones during the last few months, a recent interview on GJEPC’s website with Stephen Lussier, Executive VP of Marketing at De Beers Group, tries to pinpoint the reasons for the slowdown.
“Slowdown is Mainly Cyclical”
In his interview with the India’s Gem Jewellery Export Promotion Council, Lussier claims that “no fundamental change” has occurred in the small diamond segment but rather, that the slowdown of prices in the second half of the year is mainly cyclical and driven by “demand-supply dynamics”.
According to Lussier, in three of the most important markets for smaller sizes of diamonds – India, Turkey and the Middle East – demand was affected by problems in the economy, “especially foreign exchange fluctuations, largely external to the diamond industry”.
Furthermore, he said that these are short term issues. Over the medium term, Lussier claims that two other factors will impact demand and supply over the medium term. First, the Argyle mine, the largest supplier of small rough diamonds for the past couple of decades, is moving to the end of its life-cycle. Second, changing dynamics in the Chinese market – namely fresh demand “from the Tier III and IV markets” – will drive to increased use of smaller diamonds in the jewellery industry.
The Role of Lightbox
As for De Beers’ launch of its lab-grown jewellery brand Lightbox in September 2018, Lussier states that the move “has not played any role in the current situation”. According to Lussier, “it is a misconception that there is any fundamental change in consumer behavior. In fact, we believe that the introduction of Lightbox will help in differentiation between the two pipelines and minimize the cannibalization of small diamond jewellery segment by the LGDs”.
He claims that the immediate impact of Lightbox is in the nearly 60% fall in the prices of small lab-grown diamonds, adding that “prices are coming down to where they should be”. In contrast to natural diamonds, which will retain their rarity over the long term, LGDs will not enjoy the same fate, says Lussier, as “fashion tastes change and new designs come into vogue”.
Finally, he says, January and February 2019 saw “good demand for [diamonds] in Valentine’s Day in the US, and some improvement in China too” according to “anecdotal evidence” from De Beers’ partners. He maintains that the economic situation is better than a few years ago “so demand should rise”, but cautions that “there is currently too much unpredictability to be sure about anything” such as the fate of the US-China tariff, the impact of Brexit, and the elections in India.
