The diamond market is a complex and constantly evolving industry. With slowed-down sales, saturation in the market, competition with lab-grown diamonds and changing trends, what can we expect next? Here is our half-yearly report on the Diamond Market Trends 2023.
The current state of the Diamond Market
Diamond prices continued to decline in June, with round diamonds falling more than fancy cuts. This is due to a number of factors, including the global recession, the increasing popularity of lab-grown diamonds, and the "engagement gap" caused by the COVID-19 pandemic.
Round diamonds saw price declines of 5-6% for sizes 0.18-0.22 carats and 4.5-5.5% for sizes 0.23-0.29 carats. Fancy cuts, on the other hand, saw price increases of 1.5-5.5% for sizes 0.50-0.69 carats and 1-2.5% for sizes 1.00-1.24 carats.
The decline in round diamond prices is being driven by a number of factors. First, the global recession has led to a decrease in demand for luxury goods. Second, the increasing popularity of lab-grown diamonds is making it more difficult for mined diamonds to compete. Finally, the "engagement gap" caused by the COVID-19 pandemic has led to a decrease in the number of couples getting engaged.
Fancy cuts, on the other hand, are seeing price increases because they are less expensive than round diamonds and are still in demand. Additionally, manufacturers in India are chasing roughly under 0.75 carats to keep their factories busy and avoid laying off workers.
Overall, the diamond market is facing a number of challenges. However, there are still some bright spots, such as the increasing popularity of fancy cuts. It remains to be seen how the market will fare in the coming months.
How has 2023 been in terms of sales so far?
Uncertainty surrounding diamond sales is the most common sentiment in the industry. Whether they will increase, decrease, or remain unchanged?
To understand this better, we must know that diamond sales and prices have always been closely linked to global GDP. This means that sales are high during times of economic prosperity and decline during economic slowdowns. The economy was booming in 2021 with global diamond jewellery sales reaching record levels and managed to maintain this throughout the year. 2022 showed a slowdown in sales, especially in the second half of the year.
By the end of the year, many were worried about an upcoming recession in 2023. But fortunately, despite predictions, industry analysts now believe that the global economy is unlikely to enter a recession. The prevailing sentiment is that the economy will experience a controlled slowdown, which could have a positive impact on diamond jewellery sales. Expert prediction is a modest single-digit percentage increase in sales, primarily due to above-average inflation.
The Debswana Venture
De Beers, the world's largest diamond producer, signed a new deal with the government of Botswana. The deal gives De Beers a monopoly on the production of diamonds in Botswana, which is the world's second-largest diamond producer.
"This agreement is a major step forward for Botswana and for the diamond industry," said President Masisi in a statement. "It will ensure that Botswana continues to benefit from its diamond resources for many years to come."
The new deal also calls for the creation of a Diamonds for Development Fund, with De Beers set to invest as much as $750 million over the next 10 years. This will be used for the development of commercial diversification within Botswana, looking beyond diamonds to areas such as agriculture, climate change, solar development and tourism.
The deal has been criticized by some for giving De Beers too much power in the diamond industry. However, De Beers argues that the deal will benefit Botswana by providing the country with a stable source of revenue.
Growth of lab-grown diamonds
Nobody can ignore the fact that the segment of lab-grown diamonds (LGD) has significantly affected the natural diamond market. Lab-grown diamonds are diamonds that are created in a laboratory. They are chemically and physically identical to mined diamonds, but they are often much cheaper. The growing awareness among consumers about the environmental and ethical impact of diamond mining is resulting in more consumers seeking out lab-grown diamonds produced in a sustainable and ethical manner. They are now estimated to account for about 2% of the global diamond market.
However, with increasing market participants, the supply of lab-grown diamonds is outpacing demand, leading to dropping prices. According to an industry analyst, the price of a 1-carat lab-grown diamond has slid by 27% in a span of two years, and larger stones have seen an even more significant price decrease. Retailers are becoming less motivated to sell lab-grown diamonds due to the falling prices, and a shift in the market is anticipated. Moreover, the ongoing debate regarding the diamond’s worth, legitimacy, and production value has made consumers wary of buying them.
While the growth of lab-grown diamonds is a threat to the traditional diamond industry, it could also be an opportunity for the industry to innovate and find new ways to appeal to consumers.
De Beers launch lab-grown diamonds!
De Beers’ only just launched a bunch of engagement rings under its Lightbox brand granting synthetic diamonds further credibility. This move surprised many in the industry since the brand always highlighted lab-grown diamonds for fun and affordability, and not for milestone events.
The expansion shown by De Beers into the lab-grown diamonds market is a trial by Lightbox, in response to the growing consumer interest in lab-grown diamonds. This is a significant development that could have a number of implications for the diamond industry.
On one hand, this can be seen as a strategic move by De Beers’. With the new terms of the Debswana deal, the diamond giant's share will be reduced by 25% in the next 10 years with an immediate loss of 5%. This expansion into the lab-grown diamonds market could also be seen as a way for the company to protect its market share in the diamond industry. If lab-grown diamonds continue to gain popularity, they could eventually pose a threat to the demand for mined diamonds. By entering the lab-grown diamonds market, De Beers is hoping to stay ahead of the curve and maintain its dominance in the diamond industry.
On the other hand, it could be seen as a sign that De Beers is acknowledging the growing popularity of lab-grown diamonds. Lab-grown diamonds are often seen as a more ethical and sustainable alternative to mined diamonds, and they are becoming increasingly popular with consumers. By entering the lab-grown diamonds market, De Beers is hoping to tap into this growing demand.
Brand over value
Consumer behaviour, particularly among Gen Z, has witnessed a notable shift where a lot of emphasis is placed on brand names rather than value or quality. According to the De Beers Diamond Insight Report 2022, 76% of diamond jewellery purchased by Gen Z’s is branded. Purchasing items associated with a luxury brand is the new definition of social status, identity, and a sense of belonging amidst this age group.
As a result, businesses must adapt to this changing trend by prioritizing brand-building efforts and ensuring a strong brand image that resonates with Gen Z consumers. This includes creating authentic and relatable brand narratives, leveraging social media platforms to engage with the target audience, and delivering unique experiences that align with their values.
Exploring the boon and the banes
The new De Beers deal with Botswana is expected to have a number of effects on the diamond industry.
Increased stability in the supply of diamonds. De Beers is the world's largest diamond producer and the new deal guarantees that Botswana will continue to be a major source of rough diamonds for the company. This will help to ensure a stable supply of diamonds for the global market.
Increased investment in Botswana. As part of the deal, De Beers has agreed to invest $825 million in Botswana over the next 10 years. This investment will help to boost the country's economy and create jobs.
Increased transparency in the diamond industry. The new deal includes provisions that are designed to increase transparency in the diamond industry. This will help to combat the problem of conflict diamonds, which are diamonds that are mined in areas of conflict and used to finance violence.
The deal could boost the Botswana economy. The investment from De Beers could help to boost the Botswana economy and create jobs. This could benefit the country's overall development.
Lab-grown diamonds are cheaper than mined diamonds, which makes them more accessible to consumers. They are also more ethical, as they do not involve the mining of diamonds in conflict zones.
Now let us talk about some of the potential negative implications:
Higher diamond prices. If the supply of diamonds is restricted, it could lead to higher prices for diamonds. This could benefit diamond miners and diamond traders, but it could also make diamonds less affordable for consumers.
Reduced competition. The deal gives De Beers a monopoly on the production of diamonds in Botswana. This could reduce competition in the diamond industry and lead to higher prices for consumers.
Increased environmental impact. The diamond mining industry has a significant environmental impact. The new deal could lead to increased mining activity in Botswana, which could have a negative impact on the environment.
Increased human rights concerns. The diamond mining industry has been linked to human rights abuses in some countries. The new deal could lead to increased human rights concerns in Botswana, if De Beers does not take steps to ensure that its operations are conducted in a way that respects human rights.
With the opening of the Diamond Fund it could lead to increased concentration of power in the diamond industry. This could make it more difficult for smaller diamond producers to compete. The fund is focused on sustainability, transparency, and innovation, but it is important to ensure that these initiatives are truly effective.
Lab-grown diamonds could lead to a decline in the demand for mined diamonds, which could hurt the profits of diamond miners and diamond traders. They could also lead to a decrease in the value of mined diamonds.
The Shift in the Industry known as Lab Grown Diamonds.
Lower diamond prices. If lab-grown diamonds become more popular, it could lead to lower prices for mined diamonds. This could benefit consumers, but it could also hurt diamond miners and diamond traders.
Increased competition. The entry of a major player like De Beers into the lab-grown diamonds market could lead to increased competition. This could benefit consumers, but it could also hurt smaller lab-grown diamond producers.
The shift in consumer preferences. If lab-grown diamonds become more popular, it could lead to a shift in consumer preferences. This could mean that consumers are more likely to choose lab-grown diamonds over mined diamonds.
This could benefit lab-grown diamond producers, but it could also put pressure on the supply of lab-grown diamonds as well as cause consumers to put their money on pieces that have no investment value.
Impact on the diamond dealer community and diamond industry
This new deal and all the above changes could pose a number of hindrances for diamond dealers.
Reduced access to diamonds. The deal gives De Beers a monopoly on the production of diamonds in Botswana, which could reduce the supply of diamonds available to diamond dealers. This could lead to higher prices for diamonds and make it more difficult for diamond dealers to find diamonds to sell.
Increased competition. The Diamond Fund could invest in new diamond mining technologies and applications, which could lead to increased competition for diamond dealers. This could make it more difficult for diamond dealers to compete and earn a profit.
The shift in consumer preferences. The deal and the fund could lead to a shift in consumer preferences towards lab-grown diamonds or other alternatives. This could reduce the demand for mined diamonds, which could hurt diamond dealers.
Increased regulation. The deal and the fund could lead to increased regulation of the diamond industry. This could make it more difficult for diamond dealers to operate and could increase their costs.
Here are some specific problems that diamond dealers might face:
They might have to pay higher prices for diamonds. If the supply of diamonds is restricted, it could lead to higher prices for diamonds. This could hurt diamond dealers' margins and make it more difficult for them to compete.
They might have to find new sources of diamonds. If there is a sole supplier of diamonds from Botswana, diamond dealers will have to find new sources of diamonds. This could be difficult and expensive.
They might have to change their business models. The new deal and the fund could lead to a shift in consumer preferences towards lab-grown diamonds or other alternatives. This could force diamond dealers to change their business models to adapt to the changing market.
Pain points the industry might have in terms of transparency, regulation, sustainability
Lack of transparency: The diamond industry has a long history of opacity. This has made it difficult for consumers to know where their diamonds come from and whether they are conflict-free.
Regulation: The diamond industry is heavily regulated in some countries, but it is not regulated in others. This can make it difficult for diamond traders to operate in a consistent and transparent manner.
Sustainability: The diamond industry has a significant environmental impact. This is due to the mining of diamonds, which can pollute the environment and displace communities.
Can we leverage new technology to aid us?
Web3 technology has the potential to help solve some of the problems facing the diamond industry.
For example, blockchain technology can be used to increase transparency in the diamond supply chain. This would make it easier for consumers to know where their diamonds come from and whether they are conflict-free.
This technology can also be used to create new markets for diamonds, such as the trading of diamonds on decentralized exchanges. This could help to increase the liquidity of the diamond market and make it easier for diamond traders to operate.
Creating an ecosystem that is decentralized and transparent could solve the problems this industry faces and would help aid the dealer's processes and provide the most value to our consumers. Hear our thoughts on this here: Web3 Ecosystem for the Diamond Industry - YouTube
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