Outwardly, mining companies comment on the decline in the global demand with Olympian calmness: there are temporary issues with the distribution of the excess supply formed in the market earlier, shortage of lending to the industry, slowdown of the Chinese economy, trade war between the USA and China, etc. In short, everything is temporary, comes and goes …
And at the same time, as if just in case, they assure that synthetic diamonds have already carved out their niche, having attracted their own separate consumer, and it seems that they do not particularly interfere with the development of the natural diamond market. Moreover, the separation measures have already been taken – from administrative (introducing separate product codes at the government levels, extending the ‘price over volume’ policies, etc.) to technological measures (developing devices like D-Secure). And what remains to be done by the key participants in the diamond market – just to rely on ‘temporary challenges’ and take measures traditional for a ‘bad cycle’ period?
Let’s try to consider a more extensive set of drivers that supports or results in the diamond industry decline, with a special emphasis on the particular situation of the diamond mining leader ALROSA.
- Threats from the synthetic diamonds
1.1. The acceptance of the synthetic diamonds by the society is an actual indifference of people to the ‘end of the cult of the natural diamonds’.
1.2. Even the global jewelry industry is practically indifferent to the decline in the status of the natural diamonds – they are simply replaced by the synthetic diamonds.
1.3. The constant decline in prices, and, as a result, an increase in the production of synthetic gem-quality diamonds cut to make polished diamonds.
1.4. Sales without much risk of the cut and polished synthetic diamonds passed as polished diamonds made from natural rough diamonds.
1.5. The difficulty of identifying (especially by buyers and in jewelry pieces) that the diamonds are synthetic stones, not natural ones.
1.6. The actual equal status of the polished diamonds made from natural rough diamonds and the cut and polished synthetic diamonds at the regulatory level, which is established by the Federal Trade Commission in the USA.
1.7. An aggressive marketing support for the synthetic rough diamonds promotion – stimulating the perception of the synthetic diamonds by young people as ‘innovative’ and ‘green’.
1.8. the lack of effective advertising and marketing counteraction to the synthetic rough diamond promotion campaigns.
1.9. The fulfillment by De Beers, that de facto is a key driver of the diamond market development, of its own synthetic diamond programme (which is a betrayal of the principle of maintaining a shortage in the diamond market).
- Threats from the changed consumer consumption pattern
2.1. A decline in the interest in jewelry, the replacement of the cult of material values among young people with ‘collecting experiences’.
2.2. The emergence of new markets for popular household goods (gadgets) that distract the attention and resources of the young people from jewelry.
2.3. The general desire of people to start living ‘spending rationally’.
2.4. People are not confident in their ‘tomorrow’ due to the instability – trade wars, etc., and they are not confident in the polished diamonds as a value storage tool.
2.5. The failure of the diamond industry to provide a rough diamond with the real status of an investment tool – the lack of measures to maintain the investment interest in rough and polished diamonds (the world’s gold and currency reserves do not perceive rough and polished diamonds and as the gold and currency reserves, there is no concept for buying diamonds, the Rapaport’s pricelists are conventional).
- Threats from the changes in the global economy
3.1. Trade wars.
3.2. Devaluations of currencies of the developing countries against the dollar.
3.3. As a result, there is no confidence in the diamond business success, resulting in tightened lending to the diamond business in the developing countries.