The diamond market will likely overcome its current challenges by 2021, but until then it will weather another bumpy year or two, according to the annual report on the diamond industry prepared by Bain & Co. and Antwerp World Diamond Centre.
If historic patterns hold, the market will return to its “precrisis” state within two years, assuming that rough supply keeps falling, demand rises, and the industry continues its current marketing levels, it said.
But don’t expect the market to turn the corner next year.
“We expect 2020 to be better for the industry once the midstream starts to clear its excess inventory,” the report said. “However, ongoing supply–demand inequality will prevent full recovery of the industry and may be exacerbated by a continuing decrease in available financing for midstream players.”
It predicted that retail demand will likely stay stagnant in 2020, because of growing fears of a worldwide and U.S. recession. The trade will likely have to wait for 2021 to fully return to growth, it said.
Much of the report was devoted to the current crisis, which it attributed to record-high diamond production at the beginning of the year, coupled with lower-than-expected demand. That demand drop was sparked by global tensions and macroeconomic issues, as well as “an increase in e-commerce-created efficiencies in the supply chain that decreased the need for inventory on hand.”
U.S. diamond jewelry sales at retail will likely drop 2% this year (2019), it said—in contrast to 2018, when they rose 3%. The report attributed the drop to falling U.S. consumer confidence, which this summer hit its lowest point in three years; declining tourism from China, which hurts luxury purchases; and the 15% tariff on Chinese jewelry that was enacted in September. “Like never before, everyone is closely watching this holiday season, which will determine retail’s final annual results,” the report said.
Some other takeaways from the annual industry review:
– Financing for midstream players has decreased by $5 billion, or 30%, since 2013. Next year, financing will likely prove even more challenging, it said. The report estimated outstanding midstream debt at $11 billion.
– Natural polished prices declined by 3% in the first nine months of the year, and rough prices fell by 2%. Overall rough diamond sales fell 25%.