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The latest developments in the diamond market

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<h2 id="h-the-latest-developments-in-the-diamond-market">The latest developments in the diamond market</h2>

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In a village of La Mancha, the name of which I have no desire to call to mind, there lived not long since one of those gentlemen that keep a lance in the lance-rack, an old buckler, a lean hack, and a greyhound for coursing.

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By Harold Dupuy, FGA

As the country headed into the holiday season, the jewelry industry received some good news. Following six months of disappointing jewelry store sales results, July, August, and September saw growing sales increases over the prior year, and the Department of Commerce was estimating that the trend continued through October. Although the holiday season sales results have not yet been calculated as of presstime, I am optimistic that this recent upswing will continue.

As the country headed into the holiday season, the jewelry industry received some good news. Following six months of disappointing jewelry store sales results, July, August, and September saw growing sales increases over the prior year, and the Department of Commerce was estimating that the trend continued through October. Although the holiday season sales results have not yet been calculated as of presstime, I am optimistic that this recent upswing will continue.

<h1><img src="https://mjsa-site-assets.s3.amazonaws.com/2020_MJSA_Journal/January_2020/Snapshot-Header-0120.jpg" alt="Diamonds" width="800" height="480"></h1>
When looking at industry-related revenue, diamonds and diamond content in finished jewelry generally represent approximately half of the dollar value. Considering this significant contribution, the diamond segment can easily influence the overall market performance. The natural diamond segment is presently undergoing challenging times.
Essentially, there is an inventory overhang in the midstream sector, and, more importantly, there is little to no profit in the midstream manufacturing sector. Finally recognizing this challenge, De Beers relaxed some of the Sightholders’ requirements, allowing deferments of boxes to later sights, higher rejection rates from 10 percent to 20 percent on selected boxes, and price reductions in the 5 percent range for the November sight.
While this inventory overhang will eventually work its way through the pipeline, it’s been a difficult year for De Beers and other mining giants. De Beers has completed nine of the 10 annual sights, and their revenue declined $1.25 billion. Russia’s Alrosa has likewise experienced a challenging year with revenue down 31 percent through October.
Encouragingly, the last three De Beers sights have seen improving sales volume, although still significantly below last year’s comparable. Since data indicates that diamond jewelry (including loose diamonds) sales in the U.S. retail market were relatively flat in 2019, I believe that after five consecutive months of reduced supply, the excess inventory in the midstream has started to move downstream. Prudently, De Beers recently reduced its 2020 production outlook by approximately 3 percent.
Meanwhile, total gem quality diamond imports into the U.S. through September have totaled $15.7 billion versus the prior year for the same period of $17.8 billion.
On the other side of the spectrum, lab-grown diamonds continue to spark headlines both in and outside the industry as the consumer market acceptance of this new product category increases. While best estimates of market share range around 3 to 5 percent, almost everyone agrees that it is given a disproportionate amount of media attention.
Given the rising profile of lab-grown diamonds with consumers, jewelers should expect to see even more of these stones. Screening and detection continues to be a challenge in the industry. When considering purchasing screening technology, jewelers should consult with the Diamond Producers Association website (diamond producers.com/assure) for the ASSURE Program testing results for the 24 instruments that have been independently tested by Underwriters Laboratory.
For the latest thoughts on the lab-grown topic, an insightful two-hour discussion with industry leaders recently took place at the Dubai Diamond Conference. The video of the discussion <a href="http://www.youtube.com/watch?v=XZSlRce7iFU" target="_blank" rel="noopener noreferrer">is available on YouTube</a>. Even if jewelers currently have no plans to work with these stones, it’s still important to stay on top of them and the role they could play in the future of the jewelry industry.

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<h1><img src="https://mjsa-site-assets.s3.amazonaws.com/2020_MJSA_Journal/January_2020/Snapshot-Header-0120.jpg" alt="Diamonds" width="800" height="480" /></h1>
When looking at industry-related revenue, diamonds and diamond content in finished jewelry generally represent approximately half of the dollar value. Considering this significant contribution, the diamond segment can easily influence the overall market performance. The natural diamond segment is presently undergoing challenging times.
Essentially, there is an inventory overhang in the midstream sector, and, more importantly, there is little to no profit in the midstream manufacturing sector. Finally recognizing this challenge, De Beers relaxed some of the Sightholders’ requirements, allowing deferments of boxes to later sights, higher rejection rates from 10 percent to 20 percent on selected boxes, and price reductions in the 5 percent range for the November sight.
While this inventory overhang will eventually work its way through the pipeline, it’s been a difficult year for De Beers and other mining giants. De Beers has completed nine of the 10 annual sights, and their revenue declined $1.25 billion. Russia’s Alrosa has likewise experienced a challenging year with revenue down 31 percent through October.
Encouragingly, the last three De Beers sights have seen improving sales volume, although still significantly below last year’s comparable. Since data indicates that diamond jewelry (including loose diamonds) sales in the U.S. retail market were relatively flat in 2019, I believe that after five consecutive months of reduced supply, the excess inventory in the midstream has started to move downstream. Prudently, De Beers recently reduced its 2020 production outlook by approximately 3 percent.
Meanwhile, total gem quality diamond imports into the U.S. through September have totaled $15.7 billion versus the prior year for the same period of $17.8 billion.
On the other side of the spectrum, lab-grown diamonds continue to spark headlines both in and outside the industry as the consumer market acceptance of this new product category increases. While best estimates of market share range around 3 to 5 percent, almost everyone agrees that it is given a disproportionate amount of media attention.
Given the rising profile of lab-grown diamonds with consumers, jewelers should expect to see even more of these stones. Screening and detection continues to be a challenge in the industry. When considering purchasing screening technology, jewelers should consult with the Diamond Producers Association website (diamond producers.com/assure) for the ASSURE Program testing results for the 24 instruments that have been independently tested by Underwriters Laboratory.
For the latest thoughts on the lab-grown topic, an insightful two-hour discussion with industry leaders recently took place at the Dubai Diamond Conference. The video of the discussion <a href="http://www.youtube.com/watch?v=XZSlRce7iFU" target="_blank" rel="noopener noreferrer">is available on YouTube</a>. Even if jewelers currently have no plans to work with these stones, it’s still important to stay on top of them and the role they could play in the future of the jewelry industry.

Snapshot : January 2020

The latest developments in the diamond market

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