The age of most natural diamonds ranges between 1 billion and 3.5 billion years. They can usually be found at depths between 150 and 250 kilometers, while others are hidden at staggering depths that can reach even 800km.
Ever since the first diamond was mined, the value has been slowly increasing. At the start, diamonds were used as a sign of affection and for cutting hard materials. Nowadays, they are considered to be a valuable commodity one can invest in.
Over time, the industry developed to include things such as diamond exchange markets, wholesalers, mining companies, and more.
We would like to present you with some key points related to the diamond market in 2021.
Summary of the key points
Like any market, the diamond market suffered during the Covid-19 pandemic. However, this market bared its losses far better than any other market that deals with luxury items. According to Antwerp World Diamond Center, during 2020, the revenue share declined somewhere between 15 and 33 percent. Operating margins followed with a decline of 1 percentage point to 22 percentage points. However, the diamond market was still better off than other luxury item markets, with a total share of 22%. In the previous year, the retail diamond market was worth $64 billion, which can be considered as an astonishing figure during the world crisis.
Rough diamond production kept its downtrend, falling to 111 million carats. Ever since it reached its peak of 152 million carats in 2017, the production has been declining further. In 2020, production decreased by 20% in comparison to numbers we’ve seen in 2019. To reiterate, this was a direct result of the general downtrend and Covid-19.
At the beginning of 2020, all major miners canceled production and allowed their clients to postpone orders. This resulted in a record number of diamonds on stocks in the third quarter of 2020 – 65 million carats. However, this proved to be a smart move since the number of stockings declined by 17% in the last quarter. Thanks to holidays the number of orders increased, and miners ended 2020 with fewer diamonds on stocks than in the same quarter of 2019.
Since 2018, diamond prices have been falling down. By 2019, the cost of rough and polished diamonds fell by 7% and 4%, respectively, while in 2020 it fell by 11% and 3%, respectively. However, thanks to the last quarter of 2020 and the reduced number of stocked diamonds, high-quality diamonds recovered from the price fall and even gained some of the value back.
Diamond market future
Looking at the current state of the diamond market, we can already see some new trends appearing.
As a start, during the Covid-19 pandemic, most of the diamond market moved towards utilizing digital technologies. A digital pipeline for B2B commerce emerged in 2020 as several platforms (UNI-Diamonds, Get-Diamonds, Clara Diamond Solutions). These platforms started selling rough and polished diamonds digitally without requiring the buyer to be physically present. Business-to-consumer e-commerce also grew in 2020, with about 20% of retail sales being realized through online means. Major diamond jewelry retailers reported that their numbers were 60-70% higher for online sales than in the year before.
The continual development of technology contributed to having a double-digit growth in production and lowered retail prices for lab-made diamonds in 2019 and 2020. The price difference between lab-made and natural diamonds now goes up to 10 times. Besides the price, the ecological factor is also proving to have an impact here, as major jewelry retailers are also choosing lab-made diamonds since they are more “green” and better for the environment.
Since sustainability became a big issue and most new generation buyers are determining whether or not they should buy a diamond based on it, many companies across the value chain responded with initiatives for tackling emission and water consumption.
Since the supply chain and production are now digitally based, buyers are getting more confident in regards to purchasing diamonds, which will imminently lead to price growth.
In January 2021, most of the diamond miners reported 5-8% of price growth. For this year, the prediction of supply growth is from -2% to 2%, respectively. However, the future of the diamond market looks better. Between 2022 and 2024, the diamond market is expected to fully recover from the pandemic impact, embrace digital technologies, and engage consumers differently in order to capitalize on long-term growth prospects.
Thanks to the new global capitalistic order, it’s expected that new consumers, such as India and China, will speed up the recovery process and boost market prices.
The outcome remains to be seen, but looking from today’s perspective, the diamond market is a far better investment than other luxury assets.