Diamond industry reels from volatility

SHARE   |   Tuesday, 20 September 2016   |   By Kabelo Adamson

 Volatility is now considered the new normal in the diamond industry; this is according to the Diamond Insight Report 2016 published by De Beers this week. The report, which has been published yearly since 2014 by De Beers, says over the past years new regional and global trends have emerged with main changes relating to macro-economic trends in emerging economies, especially in China and India. With these developments, the report says, members of the diamond industry will need to strengthen their competitive capabilities through investment in innovation and marketing. The report indicates that volatility is here to stay and is not going away anytime soon as global markets are likely to fluctuate, potentially increasing the industry’s inherent instability.

The diamond industry is also said to be facing a number of uncertainties and first among them is the overall macro-economic environment as the outlook for the industry and the consumer demand is reportedly intrinsically linked to the strength of the global economy. The report indicates that there are three additional uncertainties across the value chain that is likely to have significant implications for the industry. First consumer attitudes towards diamonds, which over the next decade, are expected to continue to broaden as diamond jewellery retailers innovate and invest to keep diamond jewellery relevant for new consumer demographics. When launching the report on Wednesday, De Beers Executive Head, Strategy and Corporate Affairs, Gareth Mostyn said they will invest as much as $120 million on their marketing campaigns.

The second doubt is the evolution of the distribution channel which in the next decade is feared could bring increased corporatisation and consolidation of the midstream while the third is the supply of diamonds with the overall diamond supply expected to continue to expand slightly due to technological breakthroughs in diamond mining, cutting and polishing as well as greater supply of recycled diamonds. On the downstream side, the insight report says after five years of uninterrupted growth in the value of diamond jewellery sales to consumers, and following a record 2014, demand for diamond jewellery measured in US Dollars declined marginally in 2015.The reason for the decline is said to be primarily due to unfavourable currency movements and the economic slowdown in China and other emerging markets.

The value of diamond jewellery sold to consumers in 2015 is reported at an estimated $79 billion down from $81 billion the year before - a two percent decline. The decline was in contrast to positive growth of three percent in 2014. In 2015 global consumer demand was mainly driven by the US market due to the US economy’s sustained recovery and the strength of its labour market. China and India, which are some major markets for diamond jewellery sales, are said to have declined in 2015 following years of buoyant growth. In his foreword in the report, De Beers Chief Executive Bruce Cleaver said with the first half of 2016 showing signs of more stable conditions returning, it is clear that volatility in the diamond sector is not a short-term phenomenon, but the new normal.