The 9th annual global diamond study, published by Bain & Company and the Antwerp World Diamond Centre, has found that global demand for both polished and rough diamonds has been softer in the first three quarters of the year.
Short Term Challenges and Long-Term Rewards
According to the report, driven by changes in the two largest markets – the US and China – “the global diamond industry has struggled to maintain buoyancy in the first three quarters of 2019”. The authors expect a 2% drop in global diamond sales in 2019, and a drop of 25% in sales of rough diamonds.
The long-term picture seems much more optimistic. Olya Linde, a partner with Bain & Company and lead author of the report, says: “Despite several short-term challenges, we expect a positive outcome for the diamond market in the long-term”. This, she says, will follow “some uncertainty in 2019 and 2020, due to continued geopolitical instability, strong signs of an impending recession and limited marketing support, especially for non-branded and lower-end jewellery”.
A silver lining is expected for the branded luxury diamond jewelry segment. This segment, which accounts for about 15% of the total diamond jewellery market, is expected to grow at high single digits – “in line with the growth of personal luxury goods”.
Four Key Trends
Another highlight of the report details four trends that “have the highest potential to impact the industry in the near term”:
1. Rapid growth of online sales channels: The share of online diamond is accelerating, and major diamond jewelry retailers in the US and China have increased their online sales to 13% and 11%, respectively.
2. Increased marketing spending to support the natural diamond industry: Marketing efforts, both brand-focused and generic, have risen to historically high levels in 2019 as more than $200 million was invested in diamond industry marketing.
3. Developments in lab-grown diamonds: In 2018 and 2019, production of lab-grown diamonds increased 15%-20%. While Chinese companies primarily use high-pressure, high-temperature (HPHT) tech, US LGD companies “are pursuing a vertically integrated business model by selling premium branded jewellery”.
4. Increased focus on the environment and sustainability: As consumers and investors are demanding more transparent and environmentally responsible practices, the industry is more focused than ever on pipeline transparency and traceability. These steps, says the report, “could increase the confidence of both lenders and consumers. Midstream operations may become more transparent and more efficiently managed as a result”.
