The Next Chapter in Diamond Trade

In the last 10 years, China has made its name in the diamond trade. In 2010 and 2011 Chow Tai Fook, jewelers situated in Hong Kong quickly increased their presence in mainland China. The result was a rapid surge in the prices of polished diamonds.

After 2011 however, growth in China begun to slow down. Chinese jewelers quickly realized that the initial expansion into mainland china was too aggressive and jewelers had too much inventory.

President Xi Jinping also started a campaign to curb corruption. The campaign restricted the purchase of luxury items including diamonds. Let’s not forget the recent US-China trade war that has made diamond buyers cautious.

All these factors have influenced the prices of diamonds in China especially for the .30ct and .50ct diamonds. From 2010 to 2018 however, the global jewelry sales saw a 16% growth from $65.3 billion to $76 billion.

Now with the New Year, diamond experts have predicted on how the diamond market is expected to evolve for the next decade.

1. Less diamond rough supply

Mining companies across the world have a large stock of rough diamonds that didn’t sell in 2019. Reports show that the companies may try to push the stock through sales first to counter the oversupply.

Production has also peaked according to diamond experts and the overall supply of diamonds is expected to diminish over the next decade.

Some of the world’s major diamonds mining companies are set to close within the next five years alone. Argyle will close in 2021, Ekati in 2023 and Diavik in 2025.

Demand for diamonds is growing in the US, India, and China which means that prices for polished diamonds will rise over the next decade.

2. Consolidation by mining companies

Larger mining companies like Alrosa will probably not be overly affected by the drop in rough diamond supply. Small mining companies, however, will struggle as the costs of mining skyrockets.

Some mines that were viable in the last decade are no longer viable with the current prices and production.

Because of such challenges, the smaller miners are more likely to close leaving the few mining giants to continue operations.

3. Growth in the secondary market

Many diamond experts expect to see a boom in the secondary diamond market. As the supply of diamonds continues to drop over the next decade, many people are likely to sell and buy second-hand jewelry.

Baby boomers will get older and sell their diamonds to the millennials. China is also likely to become a good source for recycled jewelry as the diamond market in China matures.

4. A smaller manufacturing sector

The size of the manufacturing sector will get smaller over the next decade. Mergers are likely to take place with larger-scale operators gaining a significant share of the market.

Dealers too are finding it difficult “everybody’s supplier’s supplier is trying to sell to the customer’s customer”.

Experts argue that such a model simply isn’t sustainable. Miners are skilled in mining and cannot make the best polishers or suppliers. Likewise, manufacturers are best skilled at cutting and polishing and will not make the best retailers.

5. Advanced technology

Technology has advanced greatly over the last decade and this trend is only expected to continue. Artificial intelligence is going to play a big role in the technology used in the manufacturing process including cutting and polishing.

Retailers will focus more on the omni-channel interplay between the physical store and online business.