A diamond necklace in a Harrods division retailer in London.
Leon Neal | Afp | Getty Photos
“A diamond is endlessly,” however maybe not for the growing variety of shoppers spurning the gemstone for lab-grown counterparts, gold and even different coloured gem stones.
The slogan was coined by diamond big De Beers in 1948, capturing the impression of safety and romance. However not all relationships stand up to the take a look at of time.
The corporate’s largest shareholder Anglo American plans to divest De Beers because it restructures its enterprise after rejecting a takeover bid from BHP. Anglo American CEO Duncan Wanblad advised the Monetary Instances that promoting De Beers might be “the toughest half” of the corporate’s radical restructuring.
“Diamonds do not actually slot in anymore regardless of the sturdy legacy of De Beers below Anglo,” stated unbiased diamond trade analyst Paul Zimnisky.
“Anglo is in the end going to do what its shareholders need, and it appears they need to deal with a longer-term technique of commodities that assist the inexperienced infrastructure buildout, for instance copper,” he advised CNBC.
Dwindling diamond demand
The demand for diamonds has declined as its attract fades in a key client market: China.
Declining marriage charges in addition to rising reputation for gold and lab-grown gems all drove down Chinese language demand for diamonds, stated market analysis agency Daxue Consulting. The top of pandemic restrictions additionally noticed shoppers channeling their spending towards journey experiences as a substitute of diamond merchandise.
Diamond costs have fallen 5.7% up to now this yr, in line with Zimnisky’s tough diamond index, declining greater than 30% from their all-time excessive in 2022.
De Beers as soon as commanded a monopoly on the diamond market, however its share has fallen. Financial situations led the corporate to reducing costs by 10% firstly of the yr, Bloomberg reported citing sources.
“Final yr was a a lot harder interval for the [diamond] trade as financial challenges, a post-Covid lull in engagements and a progress in provide of lab-grown diamonds all affected demand situations,” Anglo American’s head of communications Marcelo Esquivel advised CNBC.
The core problem is the speedy progress of lab-grown diamonds.
The desire for lab-grown diamonds additionally performs a vital position in driving down costs of pure diamonds, stated Ankur Daga, founder and CEO of wonderful jewellery e-commerce firm Angara.
“The core problem is the speedy progress of lab-grown diamonds,” he stated. Daga added that within the U.S., which is the most important client of diamonds, half of engagement ring stones might be lab grown this yr, up from simply 2% in 2018.
Lab-grown diamonds, which will be as much as 85% cheaper than pure diamonds, are made in a managed atmosphere utilizing excessive stress and warmth. The method recreates how pure diamonds are solid deep within the Earth’s mantle. Lab-grown diamond gross sales have surged from simply 2% of the worldwide diamond jewellery market in 2017 to 18.4% in 2023, in line with information supplied by Zimnisky.
Moreover, the case for purchasing diamonds as an funding has dwindled, Daga stated. Diamonds have been seen as an asset and inflation hedge over the past 50 years, he elaborated. However that funding rationale has largely pale as costs plunge.
An trade ‘in hassle’
“The diamond trade is in hassle,” Daga advised CNBC, including that he believes pure diamond costs may fall one other 15%-20% over the following 12 months.
Some are a bit extra hopeful.
“There isn’t any doubt that there are some challenges within the diamond trade, however they are not challenges that may’t be addressed,” stated Anish Aggarwal, co-founder of specialist diamond advisory agency Gemdax.
He famous diamonds are discretionary merchandise and it is a case of “creating the need” for it, as with the case for different luxurious segments like high-end watches and baggage.
Just like a pure diamond, a lab-grown diamond is graded primarily based on the 4Cs — readability, colour, reduce and carat weight.
Lionel Bonaventure | Afp | Getty Photos
“The trade has not performed massive scale class advertising and marketing for nearly 20 years. And we’re seeing the aftermath of that,” Aggarwal stated, including that the diamond trade might want to work arduous to reignite Chinese language client demand.
This requires a cohesive advertising and marketing strategy, Aggarwal added. Equally, Zimnisky echoed that significant trade advertising and marketing may simply flip the diamond market on its head.
Only recently, the world’s largest jewellery retailer Signet Jewelers introduced a advertising and marketing collaboration with De Beers to propel demand for pure diamonds. Signet is anticipating a 25% upswing in engagements over the following three years.
Anglo American’s Esquivel additionally notes that increased engagements and climbing disposable incomes would assist alleviate challenges available in the market.
“It is the most important diamond miner on this planet and the most important diamond retailer on this planet working collectively, so it is vital and will actually transfer the needle for the bigger trade,” stated Zimnisky.
