It wasn’t that long ago that De Beers declared the 2010s “The Diamond Decade.” Growth in China and India was projected to drive demand, while the US would take small steps out of recession. This is what Varda Shine, then-head of De Beers’ supply arm, the Diamond Trading Company (DTC), predicted in a 2010 interview with Rough & Polished. In some sense, she was correct. The last 10 years have seen the Chinese consumer emerge as an influential force in the diamond industry. At times, that has been to the trade’s advantage. In 2010 to mid-2011, for instance, jewelers like Hong Kong-based Chow Tai Fook and Luk Fook accelerated their expansion into mainland China, prompting an aggressive and arguably speculative surge in polished prices. During other periods, however, China’s influence on the trade has been more volatile. Post-2011, growth slowed; jewelers recognized that their expansion had been too aggressive, leaving them with too much inventory. There was also the anti-corruption campaign that President Xi Jinping waged at the start of his premiership, which curbed luxury purchases. And more recently, the US-China trade war has made both consumers and the industry more cautious. These events have affected diamond demand, particularly for 0.30- to 0.50-carat goods, which are strong items in China. Shine was also correct in her assessment of the US, which continues to be the mainstay market for the diamond industry. Overall, global diamond jewelry sales grew 16% from an estimated $65.3 billion in 2010 to $76 billion in 2018, according to De Beers.
A turbulent trade
Despite the rise in diamond jewelry demand, the decade has been characterized more by turbulence in the trade. The midstream has struggled with low manufacturing profitability, tight liquidity, reduced bank credit, changing consumer habits and retail strategies, and a lack of balance between supply and demand. The 2008 financial downturn led to greater compliance requirements from financial institutions, which in turn led to reduced bank credit. The result was that manufacturers had to start self-financing more of their rough purchases, which they continued to make even as mining companies maintained high price levels relative to what cutters were getting for polished. Just as jewelry retailers were becoming more prudent about buying polished for inventory, three new mines came onstream in 2017, raising supply to pre-2008 levels and overstocking the midstream. Polished prices slumped in that environment, with the RapNet Diamond Index (RAPI™) for 1-carat diamonds declining 17.7% from January 1, 2010, to press time on December 25, 2019. Meanwhile, millennial consumers emerged as the core engagement-ring customers, and their embrace of technology effected a dramatic shift in retailers’ marketing and selling methods.
Change is the only constant
The silver lining is that the industry has made significant moves in the past two to three years to help it navigate the volatility that still lies ahead. Perhaps most notably, it is embracing technology to improve efficiency — and businesses at every stage of the pipeline will need to be more efficient if the industry is to grow amid all the changes yet to come. The industry will look very different in 10 years from now. Here, we make 10 predictions of how the market will evolve in the 2020s, though perhaps they’re better read as suggestions for what needs to happen to ensure growth. Either way, we’re optimistic that it will be better than the 2010s, perhaps even an era that’s worthy of the title “The Diamond Decade.”
