Will the year 2018 be a watershed movement for the diamond industry? Neither better nor worse than any other, it does however seem to be bringing great changes or renewal. With De Beers leading the way—and that is certainly not revolutionary—the diamond industry is taking its destiny in its hands. Half way through the year, we take stock of the changes.
Prices: too high, too low…?
This is not a time for yo-yoing prices; for the moment, diamond prices are relatively stable. Both in terms of buying rough and polished diamonds, the trends have, until now been in-line with seasonal forecasts.
So, the first half-year was solid for rough diamonds, which remain expensive and confirms worries about margins for production that remain low. The difference between the rough price and that for polished diamonds is a recurring or constant issue for the diamond industry.
Since the start of the year, however, the rough price, like the price for polished diamonds, has seen a very steady increase: 4.8% for rough and 5.1% for polished diamonds according to the Zimnisky Global Rough Diamond Price Index. The producers of rough diamonds have emptied part of their inventory due to a slight fall in overall production (which had increased greatly in 2017), and, after the summer break, short- and mid-term trends are positive.
This positive result is also supported by good global demand for diamonds, which should increase slightly this year. Demand in the USA is stable and there is growth in India and China. India looks to be a very promising market for the future, which could overtake the USA in terms of demand on the general jewelry market. According to Rapaport, which reports the results of a Euromonitor International survey, “between now and the end of 2018, India will overtake the USA to become the second jewelry market, after China.” Beyond the potential increase in the number of consumers, this demand could influence the types of gems and the style of jewels offered. Less expensive and lower quality diamonds seem to be more popular in the USA and China. A trend that should be watched closely.
The large jewelry and fine jewelry groups are doing well
The Swatch Group (Harry Winston, Omega, Longines) has announced record sales for the first half of 2018 carried by excellent demand in North America and in Asia. The Group has just upset the apple cart by withdrawing from Baselworld; although the brand was one of the cornerstones of the event, it no longer finds it sufficiently dynamic or creative and considers it to be out of phase with the current context.
Richemont, the owner of Cartier and Van Cleef & Arpels, has seen an 11% increase in jewelry sales over the last five months.
Kering, the owner of Boucheron and Pomellato amongst others, also reported solid sales in the first half-year, due to the strengthening of the brand positioning of watches and jewels.
Finally, Tiffany, which is entering a process of serious investments and the total modernization of the brand, in phase with the innovation required by the times, has also entered into a very positive dynamic. The interest that its customers—women in particular—are taking seems to confirm the value of this strategy! A resolutely forward-looking jeweler (hurray for the customization of jewelry!) that is catching people’s eyes and drawing attention…
Synthetic diamonds are part of the landscape
And what a year for synthetic diamonds! They are here to stay. And their quality keeps improving.
Although there are still frauds, we speak about them less. At the time of writing, the latest one reported on the site is incredible all the same: a single natural stone in a melee parcel (of more than 1,000 diamonds)! The GIA specified in its press release that “The increase in the amount of synthetic melee submitted — both disclosed and undisclosed — to GIA’s laboratories for identification has exponentially increased since GIA began offering its melee-analysis service in 2016”. A word to the wise.
There are many detecting machines on the market, which is constantly increasing, and at prices that are accessible to anybody. Of course, they do not all have the same particularities. If you want to find out more, read the article by Rob Bates on the subject: Screen saviors? A roundup of tools to test your diamonds. These days, it is no longer possible to do without one of these devices, just as it is no longer possible to fail to ensure the traceability of the diamonds you sell (but this is an even bigger debate).
Other essential news on the synthetic diamond front: the new terminology adopted by the American Federal Trade Commission that was communicated this summer. The word “synthetic” was removed from the recommended language in the revised Jewelry Guides. The term is not forbidden, but the word “cultured” is recommended. It also removed the word “natural” for defining diamonds. These changes will make producers of synthetic diamonds very happy.
We will remember, however, that in January 2018 the Antwerp World Diamond Centre (AWDC), Diamond Producers Association (DPA), Gem & Jewellery Export Promotion Council (GJEPC), Israel Diamond Industry (IDI), International Diamond Manufacturers Association (IDMA), US Jewelry Council (USJC), World Diamond Council (WDC) and the World Federation of Diamond Bourses (WFDB) voted in favor of the use of the term “synthetic” amongst others.
But the most revolutionary news in the field of synthetic diamonds, announced with remarkable timing, just before the Las Vegas trade fair, is the launch of a range of synthetic diamonds overseen by De Beers: Lightbox. The surprise effect was huge, but the news was rather positively received. These “high-quality fashion jewels” should be marketed this month in the USA. They are not aiming to compete with natural diamonds, even if there are still some concerns, but rather to control the synthetic diamond market… and prices. Will De Beers’ attempt work? Nobody knows, but it must be worth the risk. The issue and the success of this project are strategically important.
Nevertheless, could Lightbox have a negative impact on natural diamonds? Yes, if it takes too much market share and replaces what were planned as natural diamond purchases (e.g. for special occasions according to studies previously carried out by the brand). Or by bringing down the price of natural diamonds in an “equivalent” range (don’t all shout at once, nobody is saying that synthetic diamonds are equivalent to natural diamonds!): small goods and color diamonds. The estimated price reduction by buying a Lightbox synthetic diamond would be 75% to 85% compared with the price of an equivalent natural diamond.
To conclude, it should be noted that Signet Jewelers might be planning to sell synthetic diamonds, if there is sufficient demand!
Ethics and traceability are making slow but steady progress
As we were talking about Signet, we can stress that the American group is also part of the Blockchain pilot initiative Tracr by De Beers presented on April 11, 2018 in France. As a reminder, it is intended to “support confidence in the diamond ecosystem by creating a tamper-proof, immutable record of a diamond’s journey throughout the value chain and ensuring its provenance.” (Tom Montgomery, Senior Vice President of Strategic Initiatives). The project is still in the design phase and is not the only one on the market. But, with the weight that De Beers carries in the industry and its capacity to innovate, given the necessity of implementing a tool that can guarantee the traceability of diamonds… We are really looking forward to news!
Remaining in the field of ethics, De Beers—once again—is addressing artisanal mining and in mid-April inaugurated its GemFair program, designed in partnership with the DDI—Diamond Development Initiative. GemFair aims “to create a secure and transparent route to market for ethically-sourced artisanal and small-scale mined (ASM) diamonds”. Knowing that ASM covers approximately 20% of quality diamonds around the world and that its management and marketing are one of the biggest ethical problems in the industry, this also has its appeal!
Milestones for the future, marketing in the cross hairs
Marketing will be the key to demand. All the efforts and innovations referred to above need marketing so that customers can understand their value. And the industry really needs marketing to make consumers want to buy diamonds… Of course. Have there been any initiatives so far in 2018?
We can always talk about Tiffany and its new collections or De Beers and its perfect communication (but targeting the industry). But ultimately it is ALROSA that comes out on top: the Russian gem producer took the opportunity of the Football World Cup to advertise diamonds through an international marketing campaign. Humor and speaking of which, a good cocktail. ALROSA is thinking about selling its diamonds under a certified Russian brand that should reassure consumers about the origin of its diamonds. This is a matter for debate given the current international climate.
To conclude, 2018 is off to a good start, even if the market trends are not revolutionary. The last quarter of 2018, with the start of the holiday season, is looking positive.
However, a few initiatives have put the industry on a new course and will send it, finally, towards the future. In this regard it is sure, the diamond industry will be shaken up. Blockchain, Lightbox, GemFair, it is always De Beers that is leading the dance and setting the pace. These projects, which are all innovative, in keeping with the times and at the cutting edge, announced a few weeks apart, open the way for the major upcoming trends.
Some further reading to better understand the current year and its issues:
Source Rubel & Ménasché