It's a Tough Diamond Market - August 2024
De Beers revenue fell 21% compared to last year. Diamond production fell 19%, intentionally, to reduce output and slow the downward price trend.
Rough diamonds are having “a bit of a blood bath.” Even the Ekati mines’ production was down 27% in the second quarter. Ekati was the only bright note in the diamond mining sector. Burgandy Diamonds, the owner of Ekati, was holding one hundred million dollars in rough at the end of June.
Rio Tinto reported an overall profit across their varied mining holdings for the first 6 months, however, their diamond revenue, at the Diavik mine, dropped 40% for the same period ending June 30. The mine lost sixty-five million dollars compared to last years’ profit of forty-four million.
Sales of rough diamonds at the Okavango Diamond Company, in Botswana, fell 49.2% in the first half of 2024, and their rough prices dropped between five to fifteen percent in their latest August sale.
Paul Zimnisky reports that rough diamonds are not the only commodity performing poorly. He quotes a spokesperson for Rio Tinto who states that commodity prices “reflect a global economy which is not firing on all cylinders.”
Polished market conditions are also quite bad, especially in China where diamond demand has dried up. Chinas’ market share dropped down to ten to fifteen percent of what it used to be. Interest in high end diamonds is currently almost nonexistent.
The market slowdown is causing an oversupply of rough and polished diamonds in India. India has cut polished diamond production by about fifty percent. Poorer quality diamonds are struggling to compete with lab grown diamonds. High end diamond sales in the United States are slowing down. The U.S. is the last country globally to enter the economic slowdown. It is notable that major U.S. retail chains are underperforming compared to Independents.
India’s’ polished natural and lab grown diamond exports fell 15.5% from April to May. One business media channel stated that “The last 2 years have been one of the toughest ever for India’s diamond industry, and it’s in crisis mode now”.
Rapaport claims that natural polished diamond prices fell quite sharply in July. Flawless to VS diamonds took the biggest hits, falling between six to nine percent. SI diamonds were spared the drastic drop, sliding by about three percent. Both rough and polished diamond sales are currently being restricted at many levels of diamond mining and polishing, in an attempt to support the falling prices. De Beers has just cancelled their August sale of rough diamonds to Sightholders.
Natural diamond prices are not the only diamonds losing value. India was selling lab grown diamonds at 300 dollars U.S. a carat in 2022 and they are currently selling for seventy-eight dollars a carat … a pretty drastic drop!
There appears to be an increasing shift back to natural diamonds. It feels like Canadian retailers are worried that they may have over-reacted when promoting lab grown diamonds. Consumers are recognising that a mass-produced product really can’t be luxury.
Diamonds are not the only jewellery item feeling the pinch. The Swiss watch industry is cutting workers hours, with exports falling 7.2% year on year. Idex states that “Big manufacturers - such as Rolex, Patek Philippe, Audemars Piguet and Richard Mille - say they'll cut production capacity but will hold on to highly trained staff”.
The beginning of August witnessed a sell off on Wall Street. A poorer than expected U.S. jobs report and continuing high interest rates resulted in a two-day global sell off. The nervousness was the result of lower-than-expected job levels and the enduring high interest rates in the United States. The lower job levels will slow inflation but possibly lead to a recession and the high interest rates restrain economic growth. The indications are that the U.S. Fed will soon start decreasing interest rates which will have the positive effect of stimulating the U.S. economy and in Canada of strengthening our dollar.
There is another positive note for the Canadian jewellery and diamond community. Canada entered this period of slower natural diamond sales and generally weaker economy about two years ago. The United States is, currently, just entering at very beginning of their economic slow down. It has been my experience that the first markets to enter an economic slow down are usually the first to emerge from it.
At Regal Imports we have noticed a gradual uptick in activity and sales. Canada may emerge from this slow down just as the United States enters it.
And that’s the Regal Imports News for August, let’s keep watching and learning together … you can contribute by adding your comments.
Mel Moss
