The diamond market: what has changed in the last twenty years and what lies ahead?

Isabelle Hossenlopp

At the annual conference of the WFDB (World Federation of Diamond Bourses), which brought together the Chairs of the world’s diamond bourses in Shanghai in March, expert Avi Krawitz gave an assessment of how the diamond market has evolved over the last 20 years. Exploring the complex interactions between economics, geopolitics, market fluctuations, new practices and new entrants, he outlined the future of the sector.

Avi Krawitz also provided a critical analysis of recent downward trends in lab-grown diamond prices and their implications for the industry.

The market has gone through several phases over the last 20 years. The period leading up to the 2008 economic crisis saw the end of De Beers’ dominance, the creation of the Kimberley Process and the birth of social media, a phenomenon that revolutionized consumer habits (Facebook in 2004, Twitter in 2006 and the first iPhone in 2007). The 2008 crisis stopped growth in its tracks for the long term, bringing with it a new awareness of the need to reduce stock levels and respect market regulations. Paradoxically, the Chinese economic bubble also began to inflate from 2009, accompanied by the unprecedented growth of giant conglomerate Chow Taï Fook. From 2012 onwards, e-commerce sales and the growing importance of social media had a profound impact on retail practices. In terms of ethics and responsibility, the RJC published its Chain-of-Custody Standards Guidance, defining the practices that apply to the entire supply chain. This was another important step forward, and it provided a benchmark for the development of responsible practices by all players.

With its wealth of diamond mines, Botswana is gradually coming to the fore and attracting the world’s attention. De Beers relocated a large part of its operations there and the country has begun to set up diamond processing workshops. It is becoming more independent and has been tightening up its policy towards De Beers, going so far as to firmly renegotiate its contract with the mining group in 2023. 

A roller coaster ride      

The following years saw a calmer market emerge. New mines were discovered, boosting production and replenishing stocks of intermediaries. The COVID pandemic in 2020 once again brought this expansion to an abrupt halt, but was followed by a symbolic compensatory rebound over the next two years as the market recovered. Stocks were replenished. However, in 2023, the property crisis in China, high US inflation and the nibbling away of market share by lab-grown diamonds once again severely weakened the market. The diamond price collapsed, De Beers (which was also forced to loosen its sights restrictions) saw its sales plummet, and the Indian market stopped importing rough for 3 months at the end of 2023.

The challenges ahead

With this gloomy outlook, what are the challenges facing the diamond industry today? According to Avi Krawitz, there are five:

  • The economy

Households are consuming less, although diamond jewelry purchases are not slowing down. People are beginning to save more. Savings, which used to be equivalent to 10% of disposable income, have now risen to 15%.

Luxury consumers are also moving towards a different type of spending, with the focus on experiences (trips, travelling, etc.) rather than ownership. Retailers remain cautious about placing orders in a sluggish economic climate (China, USA). India is increasingly seen as the next market to keep an eye on.

  • Geopolitics

Contrary to expectations, sales of Russian diamonds increased in 2023. Alrosa posted a 9% increase in sales. Are we heading for a two-tier market, with one preferring perfectly traced diamonds, and the other being more tolerant about origin? If so, the former could see the value of their gemstones rise on the market, while seizing the opportunity to create a valuable story (“diamonds do good”).

  • The example of Botswana

Through the Okavango Diamond Company (ODC), Botswana is playing an increasingly important role in the country’s diamond industry. It is well on the way to becoming a major supplier of rough, having successfully negotiated a highly beneficial agreement with De Beers (25% of diamond production marketed directly, ultimately rising to 50%). Botswana is also gradually opening local cutting centers (20 new factories have sprung up in Gaborone over 2 years) and is launching a marketing campaign focused on its own diamonds. The ODC-De Beers agreement looks to be an original case study that could influence other agreements down the line. This new way of sharing mining operations – linked to the group’s disappointing results – has raised eyebrows at De Beers’ majority shareholder Anglo American, which is tempted to reconsider its position vis-à-vis the mining group. In the meantime, De Beers is looking to diversify its sources of supply (in Angola, for example).

  • Lab-grown diamonds

Lab-grown diamonds have boomed on the market, particularly in the US where they already account for half of all engagement ring sales. This type of diamond has its place alongside natural diamonds, but it must be clearly distinguished from the latter and identified by consumers. Though widely adopted by retailers – who tend to offer both types of stones at the same point of sale – lab-grown diamonds suffer from a lack of profitability due to their increasingly low price. Their use is already changing. The potential of lab-grown diamonds might no longer lie in the “bridal” segment, but in fashion jewelry or own brands. Pandora’s latest successful lab-grown diamond collection campaign is proof of this: “Once in a lifetime is never enough” .

  • Accountability

The challenge of accountability has been rekindled by the G7 decision on Russian diamonds, due to the serious consequences this will have for the diamond pipeline. Nonetheless, the issues of accountability and traceability can provide a unique opportunity to create an innovative story around the diamond and the brand, creating a relationship of trust with the consumer as a result.

These five challenges will shape the landscape of tomorrow’s diamond industry. Their impact is already being felt. Regularly publishing the analyses of Avi Krawitz and other experts will allow readers of Rubel & Ménasché’s La Lettre to follow these developments closely.

Read Avi Krawitz’s full speech to the WFDB in Shanghai HERE