The diamond retail market has been experiencing subdued demand since the second half of last year, causing the mid-stream to build up high inventories which have in turn forced producers such as De Beers to cut production.
Presenting the group’s interim financials for the first half last week, De Beers Vice President, Paul Rowley, said trading conditions for the diamond market remained difficult with jewellery sales in major markets such as China affected by poor macroeconomic conditions.
According to Rowley a lot of diamond stock remains stuck in the midstream, creating pressure at both the retail end of the market and downstream segment.
“One of the biggest diamond markets, China has been having a slow recovery, since the ending of its lockdowns and the diamond sales there are down by over 50%. “The US has remained relatively flat and this has lowered expectations for recovery,” he said.
Diamond prices declined in June as sales dropped and inventories in the midstream grew. Market analysts have noted that Indian manufacturers, who cut and polish more than 80% of the world’s rough diamonds, have reduced imports to cope with high inventories and rebuild downstream demand. Producer countries such as Botswana are restraining output, but sales at the retail end have continued to fall, negating the efforts to clear the oversupply.
Going forward, De Beers remains cautiously optimistic, but Rowley said the market was not expected to bounce back this year. He said a slight improvement was expected in the last quarter of the year as De Beers ramps up its holiday season marketing, done in partnership with players such as Signet. Signet, a retail jewellery giant, is responsible for selling more than half of Botswana’s diamonds through its stores.
Meanwhile, diamond industry expert, Martin Rapaport, in his latest industry update, says he expects synthetics to continue to take market share from natural diamonds. Rapaport expects De Beers’ revenue to continue to decline in 2024 due to competition from synthetics.
Rapaport believes synthetics will dominate the US bridal segment in 2024, accounting for over 50% of engagement-ring purchases. However, he also forecasts that the synthetic bridal market will collapse in 2025 as their very low prices will make them unsuitable for engagement rings.
According to Rapaport natural diamond demand will come back strongly as consumers return to traditional engagement rings whose value is appropriate for the gift of marital commitment.
For Botswana's diamond-reliant economy, the constrained diamond market is expected to raise the country’s fiscal deficit from the Ministry of Finance's projected P8.7 billion initially forecast for the 2024–2025 financial year.
