The R&M “Lettre”

Factors such as US fiscal policy and Chinese jewelry demand are boosting the market for now, but inflation and other complications are on the horizon.

 The rough market is buoyant after yet another price increase by De Beers, leaving many in the trade scratching their heads. Goods are selling at strong premiums on the secondary market — double-digit percentages in some categories — as manufacturers continue to boost production after the past year’s coronavirus-induced stoppages.

A few days after Lucara Diamond discovered yet another 1,000-plus ct. diamond at its Karowe mine (pictured) in Botswana, the company announced it has received 38 million Canadian dollars (about $30.9 million) in new funding.

Polished diamond prices are on a near year-long rally, rising more than 18% since last July when they hit a record low.

Diamond jewelry sales rose by about 30% in the last three months—February through May—versus 2019, according to the Natural Diamond Council (NDC).

Having improved its creditworthiness before and during the pandemic, the industry is learning to rely less on its lenders.

India is experiencing a shortage of diamonds as rough supply has dropped and polished goods remain stuck at the Gemological Institute of America (GIA).

The diamond industry is emerging from the Covid-19 crisis, says Rapaport Senior Analyst Avi Krawitz, who has identified five trends shaping the market in 2021.

Global luxury sales could return to pre-pandemic levels this year, boosted by a strong recovery in China and an unexpected early rebound in the US, according to Bain & Company.

The diamond market can return to normalcy after its impressive growth at the beginning of the year thanks to strong jewelry sales, rising profit margins for cutters and a shortage of rough diamonds. Midstream margins have decreased as the diamond prices continue to rise suggesting that the market is overheated.

Israeli bank financing of the diamond industry was cut by 33% in 2020, falling below $500 million for the first time in 30 years. The decline reflected shrinking activity in 2020 and a decline in reliance on bank financing. But mostly, it reflects banks’ balking at dealing with the complications of working with diamond firms.

Health concerns aside, the diamond trade is in better shape than it was a year ago. In fact, the market dynamic is arguably healthier than it has been at any point in the past decade. That’s increasingly evident as polished prices continue to firm.