The diamond market is undergoing a severe test. As of January 27, the global original diamond price index has fallen by 18.5% in the past 52 weeks, and the lowest value in 52 weeks on the 27th.
Behind the downward of the original diamond price index is the overall downward market. At the first original diamond viewing conference in 2024, the international diamond giant De Beers Group also began to implement a strong price reduction strategy in recent years.
According to CCTV Finance, a number of sources revealed that the price of original diamonds above 2 carats is more than 15%; the average price of original diamonds of 0.75-2 carats is 10%-15%; the price is reduced by 5% to 10% below 0.75 carats; and the comprehensive price reduction is about 10%.
Not only that, the price reduction of first-class diamonds has reached 25%. The so-called first-class diamond is a product called "selected processable diamond". The diamond weighs between 2 and 4 carats and can be cut into high-quality diamonds about half the size of the original diamond after polishing.
According to media reports, last year, De Beers Group has been adjusting continuously in recent years. On the one hand, since August 2023, De Beers Group has relaxed the procurement policy for buyers to alleviate the inventory pressure of midstream companies in the industry. At the same time, De Beers Group also stopped all online auctions of wool diamonds, and only held offline viewing fairs in the last two sales cycles in 2023. On the other hand, De Beers Group also said many times that it would provide a fully flexible policy for the distribution of rough diamonds, that is, allowing sellers to no more than half of the wool. The billet procurement plan has been postponed to 2024, and the buyers are allowed to "not purchase more than 2 carats of rough".
Continuous adjustment, the pressure is due to a significant decline in sales. According to the rough diamond sales data released by De Beers Group, in the one month (the ninth sales cycle) as of November 3, 2023, De Beers Group only sold a total of 80 million US dollars (about 582.84 million yuan) of rough diamonds, compared with 454 million in the same period of 2022. The sales of U.S. dollars (about 3.308 billion yuan) plummeted by 82% year-on-year, down 60% month-on-month from the eighth sales cycle in October 2023.
This is the sixth month since 2023 that De Beers Group's sales of rough diamonds have shown a downward trend. After the steady growth of raw diamond sales in the first quarter of 2023, De Beers's raw diamond sales fell to $456 million in May (the fourth sales cycle), while in July (the sixth sales cycle) to $411 million, and in August (the seventh sales cycle), it sold $370 million (approximely 2.687 billion yuan).
In response to this situation, De Beers Group announced that it would continue to reduce the supply of rough diamonds within one month ending November 3. In September before that, Alrosa, Russia's largest diamond mining and processing company, also announced that it would stop all diamond sales within two months to support the price. Subsequently, the Indian market, the main cutting and trading centre, also announced the cessation of imports.
However, various means have still failed to intercept the downward trend of the natural diamond market. In this process, it plays an extremely important role in cultivating the rapid development of the diamond market.
Cultivate the rise of diamonds
Unlike natural diamonds that take hundreds of millions of years to form, as a product synthesised by artificially simulating the crystalisation conditions and growth environment of natural diamonds, it only takes a few weeks to cultivate diamonds, and it has the same physical, chemical and optical properties of natural diamonds.
Not only do the physical properties and chemical composition are the same, but the cultivated diamonds also have higher purity characteristics than natural diamonds, and with the continuous improvement of the technical level, it can even make the diamond more visual impact. It is difficult to find the difference between the two by traditional means alone.
Of course, the more critical issue is the price. According to the price list released by Shenzhen Shuibei Market in November 2023, the price of one carat D colour is 73,158 yuan, while the cultivation of diamonds (bare stone) is only 3,500 yuan.
In this regard, Fleisteger, director of the Federation of Belgian Diamond Exchanges, said publicly that two years ago, cultivating diamonds was 40% cheaper than natural diamonds, and by 2023, it was 70% to 80% cheaper, or even 99%. "If you buy a piece of soap in the supermarket in the future, you may be given a diamond".
With the continuous decline of the price of cultivated diamonds, the scene expected by Freisteger has gradually come to reality. In this year's cultural tourism war, Luoyang, Henan Province launched a marketing campaign to send diamonds to tourists. It is reported that the largest cultivated diamond weighs 1 carat.
As the largest diamond production area in China, Henan's supply of cultivated diamonds accounts for 90% of the country. Among them, Shangqiu, Zhengzhou, Xuchang, Nanyang and other places are important places of origin for cultivating diamonds and their products, and have grown into many industry leaders and listed companies. Zhecheng County in Shangqiu City is also known as the "Diamond Capital of China". Every year, 6 million carat diamond blanks and diamond jewellery are cultivated and processed, and sold at home and abroad.
Moreover, Henan's cultivated diamond production not only supports the Chinese market, but also becomes an extremely important part of the global cultivated diamond market. According to the data of the Superhard Materials Branch of the China Machine Tool Industry Association, China's cultivated diamond production accounts for 95% of the world's total production, while Henan cultivated diamond production accounts for 80% of the country.
Sun Zhaoda, Secretary-General of the Superhard Materials Branch of the China Machine Tool Industry Association, once said that according to incomplete statistics, Henan produces about 12 billion carats of industrial-grade diamond cultivation every year, and more than 6 million carats of raw diamond stone, a considerable part of which is exported to India and other places for cutting and processing, and then sent to Europe, North America and other regions.
According to the data of the global jewellery industry analysis agency, the market share of cultivating diamonds has been increasing since 2021. As of July 2023, the market share has reached 49.9%, very close to the critical point of 50%.
At the same time, the cultivation of diamonds has also begun to attract more and more attention from consumers around the world. According to institutional data, up to 80% of consumers in the United States know about cultivating diamonds, and young consumers in Europe know as much as 77% about cultivating diamonds. It is expected that by 2025, China's consumption of cultivated diamond jewellery will reach 1.5 billion US dollars, and the penetration rate is expected to increase to 17%.
Turbulent market under the surge in production capacity
However, although the market prospect is huge, due to the agglomeration and release of production capacity, the price of cultivated diamonds continues to drop, and the profits of related enterprises have also been greatly affected.
According to the data released by the Yellow River Cyclone, one of the "Big Three" of the upstream rough diamond manufacturers, the company is expected to lose 645 million yuan in 2023. The company said that its important subdivision products cultivated diamonds. Due to changes in market supply and demand and other reasons, the price in 2023 decreased significantly compared with the same period, resulting in a significant decline in the company's main business profit.
In addition, Zhongbing Red Arrow achieved a total operating revenue of 1.914 billion yuan in the first half of 2023, a year-on-year decrease of 40.25%.
According to the data released by the international diamond trading platform IDEX, since this year, the price of natural diamonds has entered a downward channel, and the price index in August alone fell by 20.1% year-on-year. In addition, diamond sales have also declined significantly. This also affects the cultivation of diamonds, with the highest decline of Mossang diamonds and cultivated diamonds by 80%.
Nevertheless, the market still has good expectations for the prospect of cultivating diamonds.
Wanlian Securities released a research report saying that because the composition and structure of cultivated diamonds are the same as natural diamonds, and they have great advantages in price compared with natural diamonds, coupled with the education of the media and brand merchants for downstream consumers in recent years, the penetration rate of cultivated diamonds is expected to further improve in the future.
With the continuous development of China's diamond cultivation industry's technical capabilities, marketing methods and product capabilities, China's diamond cultivation may have a greater industry voice. However, the volatility of the diamond market, on the one hand, provides a strategic development opportunity for the cultivation of the diamond industry, and on the other hand, it is also a process of natural diamond deenchantment. This process is accompanied by the change of young people's ideas. It is also possible that "the city gate is on fire, affecting the pond fish". How to respond to the change of consumer demand may be the future training. The biggest test of breeding diamonds.
(This article is from TMT Media APP, Author | Xie Xuan, Editor | Fang Yu)