At 10 o'clock Beijing time last night, Rapport analyst Avi Krawitz held an online seminar to focus on the reasons for the slowdown in the global diamond market. There are some important data and viewpoints, which can be interpreted as follows:
The price trend of natural diamonds
As shown in the figure below, the overall price (B2B) of natural diamonds has experienced a significant decline since mid-2022. Except for the price rebound of 0.30 carats from the end of 2022 , the price performance of other sectors has been sluggish, with the most significant fluctuation being in the 1 carat sector.
Upper right: The price trend of bare diamonds in the four sections (2022.1-2023.5)
Bottom right: RapNet Diamond Price Index (2008.1-2023.1)
Below: 1 Carat RAPI Price Index Changes (2018-2023.5, Quarterly)
Mid stream bare diamond inventory remains high
Under the influence of sluggish downstream demand, the inventory of bare diamonds in the middle reaches remains high. Currently, according to RapNet's data, the number of natural bare diamonds on the platform is basically the same as around the end of 2021, which is around 1.8 million. (As shown in the figure below)
▲ 2015.6-2023.4
India's production reduction and slowing demand for raw materials
Under the pressure of midstream bare diamond inventory, India's demand for upstream natural rough has slowed down. At the same time, the supply of Russian raw materials (for Belgium and India), which were subject to Western sanctions, also experienced a 46% decrease in 2022, although their average price increased by 76%, resulting in a decrease of approximately 5% in total output value.
It should be noted that there was no significant year-on-year change in the output of Russian natural blanks from January to February this year.
Changes in India's raw material imports
Changes in Russian rough output
Three major factors affecting the diamond market
There are currently three main factors causing the global diamond market to slow down:
1) The economic environment is sluggish
2) Intervention in cultivating diamonds
3) The recovery of the Chinese market is slower than expected
The first factor is the most important, and Rapport uses the following figure for a clear comparison:
The high inflation and high interest rates in the United States have had an impact on the consumption of the American people, which has triggered pressure on the luxury goods sector (including diamond jewelry). Starting from September 2022, there has been negative growth in jewelry retail in the United States.
Upper right: US inflation and interest rate trends
Bottom right: Changes in the proportion of savings in the disposable income of the American people
Below: Trends in Jewelry Retail in the United States in 2022
The challenges faced by cultivating the diamond industry
The growth of cultivating the diamond sector is still significant, currently accounting for about 10% of the entire downstream jewelry market（ ⚠️ Avi subsequently stated in the Q&A section that further confirmation of this ratio is needed. Cultivating diamonds is attracting more retailers to participate in sales with higher profit margins.
Unlike the previously anticipated "jewelry positioning", nurturing diamond retailers has gained a certain share in the wedding jewelry field, providing greater imagination for future development.
From a scale perspective, Rapport believes that the base for cultivating diamonds is low, so the impact on the downstream market of natural diamonds is limited.
From the perspective of operational methods, due to the lower prices of cultivated diamonds, retail layers are increasingly hoping to use consignment sales to obtain goods, rather than purchasing inventory. At the same time, large enterprises adopting the vertical integration strategy of the industrial chain are constantly expanding.
In addition, due to the lower price of cultivated diamonds, some retailers have started to prefer to display them and then leave the decision of "which type of diamond to purchase" to consumers. Avi Krawitz stated at the seminar that this is a "newly emerging and interesting sales method".
Figure above: Cultivating diamond demand accounts for 10% and is attracting retail merchants to participate with high profit margins
Below: Jewelry retailers tend to adopt a consignment model and the integration trend in the middle stream
brief summary
At present, the global diamond market is in the off-season, but the industry's expectations for the second half of the year remain optimistic. The upcoming JCK exhibition and the Hong Kong Jewelry Exhibition will be important milestones, which may provide a deeper understanding and evaluation of market trends.