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ROUGH DIAMONDS

SYNTHETICS CONTINUE TO PRESSURE LOW END OF DIAMOND MARKET

 

In many respects, 2019 is likely to be remembered as the year that synthetic or laboratory-grown diamonds made their imprint on the diamond market. And, as many have predicted, the most indelible mark has been on goods at the lower end of the price spectrum, and particularly melee.

According to an article published in mid-June in the Times of India, diamonds of less than 0.30 carats have fallen in price by as much as 15 percent over the past 12 months, registering the largest decrease recorded in more than five years. The price for other goods were soft as well, albeit not as dramatically different as with melee.

Indian analysts were quick to place the blame on the man-made diamond sector. “I was surprised to see over 50 stalls of lab-grown diamond jewelry,” said Aniruddha Libide, referring to JCK Las Vegas, in the Times of India article. “The inquiries at these stalls were very good, indicating that consumer preference has changed. This is an alarm bell for the natural diamond industry in Surat, especially small and medium-sized companies.”

VALUE OF DE BEERS SALES CYCLE DOWN 60 PERCENT

The uncertainty in the market was reflected in the announcement by De Beers in August that its most recent of 10 annual sales cycles of rough diamonds $250 million, which represented a fall of more than 60 percent year-on-year.. The company clearly appeared to be reacting to the pressure its customers were experiencing, with profit margins paper thin at current price levels.

Mid-year is normally a quieter time in the rough diamonds market, but even then the total value of the De Beers sales cycle was 6 percent lower than the one which preceded it.  

De Beers itself has kept its prices steady since the start of the year, but reportedly has seen a real increase in the number of clients declining to take the goods they are being offered.  In India, low value of the rupee against the U.S. dollar has been a particular problem.

““With ongoing macroeconomic uncertainty, retailers managing inventory levels, and polished diamond inventories in the midstream continuing to be higher than normal, De Beers Group provided customers with additional flexibility to defer some of their rough diamond allocations to later in the year. As a result, we saw a reduction in sales during the sixth cycle of 2019,” said De Beers Chief Executive Officer Bruce Cleaver, in a statement released by the company.

De Beers CEO Bruce Cleaver.

COULD IT BE NEW MINES CAUSING THE GLUT?

Not all people agree that it is synthetics that are the primary suspect for the precipitous fall in prices. Speaking earlier this month at the Northern Miner Diamond Symposium in Toronto diamond analyst Paul Zimnisky spoke about some of the complexity of the diamond market.

“When we look at diamond price, it’s a nuanced commodity,” he said. “The medium and large diamonds are actually up in the last few years, but smaller categories are down 30 percent, so there has been a sharp decline in the small category.”

He attributed the supply glut mainly to excess production from several new mines. While small stones make up approximately 50 percent of the diamond sector, the value of the smaller diamonds only makes up 20 percent of global production value, making them appear more influential than they actually are.

One of the reasons for the rise in supply of smaller goods, Zimnisky said, was technology that able to recover small diamonds that earlier may have been missed. “One thing that no one really talks about is the technological advancements in the recovery. It has really increased the efficiency, and it’s also recovered a lot of smaller diamonds,” he said. “I think that’s part of the reason why the small categories are oversupplied.”

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