The middle of the diamond distribution chain is struggling to align itself with new, lower levels of wholesale demand. The result is that manufacturers and polished diamond dealers continue to be squeezed despite growth in consumer demand.
Therefore, recent reports about record diamond jewelry demand and strong diamond price growth in 2014 were somewhat misleading. They did not account for the imbalances currently at play in the diamond market.
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While consumer demand for diamond jewelry grew last year, polished diamond trading diminished. While the mining companies garnered healthy profits, diamond cutters struggled to maintain their slim operating margins. While rough diamond prices rose, polished prices fell.
Indeed, those disparities have continued into 2015, placing additional pressure on the diamond manufacturing sector.
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“While consumer demand for diamond jewelry grew last year, polished diamond trading diminished.”
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Perhaps most significantly, slower growth in consumer demand has impacted demand for loose diamonds. De Beers estimated in a report published last week that consumer demand for diamond jewelry rose 3 percent year on year to a record $81.4 billion in 2014. However, the pace of growth in fact slowed from previous years, and apart from the steady U.S. market, there was a deceleration in other major markets, most notably in China, India and Japan, the research showed.
