The recovery: next on the Horizon

Avi Krawitz

These five themes are defining the diamond market this year, and likely beyond.

Having adjusted to the major changes that occurred in 2020, the diamond trade is in an unusual position this year. The market has diverged into two streams: those centers where the economy is open again, and those still facing sporadic outbreaks of the coronavirus.

Overall, the trade continues to benefit from the Covid-19 dynamic, as consumers are not yet spending on travel and experiences the way they used to. They’re saving more, which leaves more dollars to spend on diamonds and other luxury items. But travel will return, and competition for discretionary spending will heat up again.

For now, the important consumer markets in the US and China are seeing a robust recovery in jewelry sales. At the same time, there is still a bottleneck of supply in India, the main polished-diamond distribution center. That makes for a complicated and volatile market with supply and demand trends that are difficult to predict. Meanwhile, other dynamics are influencing the trade as well, requiring it to adjust to a new reality.

As we pass the halfway point of 2021, we have identified five themes that will characterize the market in the second half of the year and likely exert influence in the long term.

1. The GIA bottleneck

All eyes are on the Gemological Institute of America (GIA) and its progress getting through the backlog of goods lined up for grading at its India labs.

As of press time on July 20, there was a turnaround time of over four weeks in Mumbai and Surat, according to the GIA website. The institute attributes the delays to a significant rise in demand for laboratory services.

The increased sales in the US and China are driving much of this demand for GIA reports,” it told Rapaport Magazine in a recent email. “Online sales are up significantly and are dependent on trusted, independent grading reports.”

Indeed, the GIA says it’s grading more diamonds in India than before the pandemic. The number of stones it has graded in Mumbai and Surat this year, based on a weekly average, is up 37% from 2019 and 31% from 2020. However, the labs’ average weekly intake is 71% higher than in 2019, the institute says, and this makes it hard to catch up.

In all locations, we are working six days a week in multiple shifts at the maximum allowable capacity to meet demand for our services as best we can,” the GIA stated.

2. Variations in supply

Uncertainty remains as to whether there will be a sudden influx of goods when the GIA backlog diminishes, a scenario that could push prices down. However, Elliot Krischer, president of the New York Diamond Dealers Club (DDC), believes manufacturers will still maintain their polished prices if such an influx occurs, as they want to protect their margins against the current high cost of rough.

The release of the GIA goods will also likely coincide with an uptick in demand as jewelers prepare for the holiday season, but even with that recovery, the trade can expect rough supply to stabilize below pre-pandemic levels. The mining companies are leading a drive toward a more efficient supply chain, which means offering their clients fewer but more targeted goods.

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Source Rapaport