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2020 TURNED OUT AS GOOD AS ONE COULD’VE HOPED FOR, STATE AUTHORS OF TACY’S DIAMOND PIPELINE REPORT

 

Turnover in the diamond sector dipped in 2020, as one would have expected in a year that was dominated by COVID-19. But in contrast to the apocalyptic predictions that were rife at the start the crisis in March, it is fair to say that the industry emerged at the end of December as well as one could reasonably could have hoped. This according to the closely watched diamond pipeline report, prepared each year by TACY’s Pranay Narvekar and Chaim Even Zohar.

According to the report, rough diamond production value equaled $9.43 billion in 2020, with mine sales to industry totaling $9.37 billion. The value of polished diamond production totaled $13.37 billion and polished diamond sales stood at $14.22 billion. Diamond content in jewelry was worth $17.07 billion, with the actual value of diamond jewelry at retail equaling $65.02 billion.

In contrast, rough diamond production value in 2019 stood at \$13.68 billion, meaning that output fell by 31 percent year on year, a reflection of the major producers’ decision to cut back sharply, allowing them to reduce pressure on the pipeline. Polished diamond sales slipped by a more moderate 21 percent, from $17.93 billion in 2019, and retail sales of diamond jewelry by an even more restrained 14.5 percent, from $76.05 billion in 2019.

The data points to a relatively healthy diamond sector moving into 2021, with robust demand for its products, and a midstream that has been able to clear out a good deal of the excess stock that it was holding on to early in 2020. Credit for that is largely due to the mining companies, which made a conscious decision at the end of the first quarter last year to support the market, at a time when future demand was far from certain.

 

MARKETS’ SWIFT RECOVERY DURING H2 2020

In the retail markets the crisis had begun ominously, the TACY report stated, with the Chinese market facing the first wave of reduced, followed by all the other major markets. In the United States, retail sales fell by half in April.

But as soon as the initial lockdowns were eased, the markets rebounded. The Chinese market recovered strongly, although it was hampered to some degree by the political unrest in Hong Kong. The Indian market also regained strength, although a little more slowly, as the lockdowns were longer.

In the United States year-on-year sales were already higher than by June than they were in 2019, meaning that, despite COVID, the world’s largest diamond jewelry market actually had a bumper second half of the year.

“The current scenario for the industry seems like a blessing to everyone, something which was unimaginable 12 months ago, when we were in the depths of the pandemic, with widespread lockdowns across the globe,” the report’s authors wrote. “The question on everyone’s mind is whether this is just another flash in the pan or whether the industry had found its mojo again.”

Polished diamond sales were down 21 percent in 2020, from $17.93 billion in 2019, to $14.22 billion, according to the TACY Diamond Pipeline Report.

Diamond jewelry at retail stood at $65.02 billion in 2020, TACY reported, 14.5 percent down from $76.05 billion in 2019.

COVID-RELATED OR A SUSTAINABLE TREND?

But caution the report’s authors, part of the strong recovery may be COVID-related, and therefore not necessarily sustainable in a post-pandemic world. 

“Clearly, while the industry is among the better performers, it is simply part of the ‘gold rush’ of consumers, as they spend on acquiring durable goods. It can be argued that consumers, who had saved from not spending on services [including  transportation, recreation, personal care, food and accommodation, all of which saw sharp downturns in 2020], as well as buoyed by the handouts provided by the government, channeled a large chunk of their excess funds into buying the physical durable which they had longed for, but had not been able to buy,” the TACY report’s authors noted.

“Additionally,” they continued, “the wealthy effect of the stock market boom, fueled by government stimulus and ultra-loose monetary policy also helped loosen the consumer purse strings.”

Digging down deeper into the data, it becomes evident that other categories of durable goods, like motor vehicles, sporting equipment, guns and ammunition and sports performed better than the jewelry industry.

“There is no doubt that diamonds and jewelry have more of an emotional element in their purchase decision,” the TACY Report authors stated. “During a crisis, and the pandemic is no different, humans do look for emotional connect, and jewelry is simply a beautiful way to express it. It is natural that couples who have been stuck at home during the last year have bought jewelry to express their love!”

“The return to normalcy is not going to be a sudden one, unlike the onset of the pandemic. As vaccinations across the globe are slowly rolled out, businesses will gradually revert back to the previous behavior over the course of the next 2-3 years,” they wrote.

Digging down deeper into the data, it becomes evident that other categories of durable goods, like motor vehicles, sporting equipment, guns and ammunition and sports performed better than the jewelry industry.

“There is no doubt that diamonds and jewelry have more of an emotional element in their purchase decision,” the TACY Report authors stated. “During a crisis, and the pandemic is no different, humans do look for emotional connect, and jewelry is simply a beautiful way to express it. It is natural that couples who have been stuck at home during the last year have bought jewelry to express their love!”

“The return to normalcy is not going to be a sudden one, unlike the onset of the pandemic. As vaccinations across the globe are slowly rolled out, businesses will gradually revert back to the previous behavior over the course of the next 2-3 years,” they wrote.

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