How to survive as the diamond trade shrinks

Avi Krawitz

The diamond trade remains under pressure, and further contraction of the market is expected this year. Apart from being squeezed by high rough costs and declining polished prices, dealers lament there are too many players chasing the same orders.

Simply put, the market is saturated with polished suppliers, and consequently with goods for which there is insufficient demand.

Manufacturers and dealers are caught between the mining and retail sectors. They carry the burden of supporting industry inventory levels, as the supply of rough diamonds is projected to rise this year, while jewelry retailers continue to consolidate and make do with less stock.

Consider that 1,669 jewelry businesses shut down in the United States in 2016, according to the Jewelers Board of Trade, and that the retail growth in China slowed in the past two years from its previous aggressive expansion.

Consumer taste, meanwhile, is also evolving as middle-income customers gravitate toward lower price points amid global economic caution. The range of polished diamonds that are in demand has therefore narrowed.

Consequently, there are consistent reports of polished shortages in select categories that are in demand and an oversupply of diamonds that are less desirable. That’s certainly the case now, as new polished is being processed.

Inventory levels are projected to rise, as large volumes of polished are expected to enter the market in the coming months given that rough buying jumped in January.

It seems the market is still struggling to find its equilibrium.

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Source Rapaport