The global diamond industry’s prolonged slump appears to be subsiding, with India, the world’s largest mid-stream diamond distributor, signaling a strong rebound in rough diamond sales.
This recovery follows a difficult period for the sector, exacerbated by macroeconomic pressures. The Gem and Jewellery Export Promotion Council (GJEPC), India’s apex body for jewelry promotion, reported “robust” diamond sales in August, calling for an increased supply of rough diamonds to meet growing demand. While official figures are yet to be released, the GJEPC’s optimism has fueled renewed confidence in the industry.
Executives from the GJEPC attributed the recovery to reduced polished diamond inventories and lower rough diamond production, which have helped stabilise the market.
“After a challenging 18 months, the industry is at a critical turning point,” they noted, with manufacturers scaling back production and borrowing. Prices in some diamond segments have also started to rise. The council encouraged industry players to seize this opportunity to reinforce confidence in natural diamonds and work towards a prosperous future.
De Beers has also shifted its marketing strategy, focusing on China, which has been slow to recover from the pandemic. De Beers Vice President, Paul Rowley, highlighted that the U.S. market is warming up, with sales expected to peak during the upcoming Christmas season.
“We will turn our marketing spend to markets like China to increase sales in the upcoming holiday season,” Rowley said.
However, challenges persist. Debswana, the diamond mining company owned jointly by De Beers and the Government of Botswana, reported that its diamond sales in the first quarter of 2024 fell by nearly half compared to the same period in 2023. Sales dropped from P14.1 billion to P7.6 billion, a decline attributed to low demand and competition from synthetic diamonds. Rough diamond prices have been under pressure, exacerbated by last year’s record sales, and geopolitical tensions have further dampened market demand.
Rough diamond sales by De Beers, for instance, fell by 42 percent year-on-year in November 2022. A provisional August 2022 sale brought in $370 million, compared to $411 million in the previous auction. The U.S., which accounts for over 50 percent of the global retail diamond market, has struggled with inflation and interest rate hikes, reducing disposable income and demand for diamonds.
Botswana’s economy, heavily reliant on diamonds, has felt the impact. Economists at Econsult raised concerns in their second-quarter review, questioning whether the downturn is a short-term market fluctuation or indicative of a long-term structural shift. They warned that if the downturn represents structural change, reliance on fiscal buffers to offset its impact is unsustainable.
“Market cycles of booms and busts are normal, as seen in industries like financial services, which experienced downturns in 2008 and 2016. However, when down cycles are prolonged, they can erode investor confidence, harming market valuations and potentially deterring investment,” Econsult economists stated.
While recent developments have shown some improvement, the diamond industry remains in a delicate state. Margins are narrowing, and concerns linger about the long-term performance of the industry. This uncertainty poses risks for diamond-dependent economies like Botswana, which must prepare for the possibility of sustained structural challenges.
