It's a Diamond Buyers Market - October News

It’s a diamond buyer’s market. Demand is soft and prices are low. Indias’ polished diamond exports are down 43% over the past 2 years. Rapaport notes that, “this is the third fiscal year the manufacturing sector has contracted”. Both miners and polishers are trying to reduce their inventory and expenses. Miners are cutting production and diamond polishers are limiting purchases and laying off workers.

Alrosa and De Beers plan to sell less rough and maintain higher prices. They will limit supply until demand improves. There are encouraging signs that this strategy is working as some analysts claim the price of larger diamonds rose during the month of September. Petra Diamonds CEO believes “that prices will stabilize through to the end of 2024, with some improvement expected in 2025.”

There are rumblings at the Canadian diamond mines. The Diavik mine is scheduled to close in 2026 and they are already preparing to terminate employment contracts. Burgandy Diamond made plans to extend the life of the Ekati mine by expanding underground. They claim that their “entire business could hinge on this (underground) project”. However, they are complaining that government regulations are too onerous
and asking the government for assistance during the current slowdown.

Kim Truter, CEO of Burgandy Diamonds told the Government of the Northwest Territories that, “Since the acquisition (of Ekati diamond mine) prices have declined by at least 20%, and the industry remains in a state of turmoil. Despite this backdrop, there has been little support forthcoming.”  Mr. Truter could be using the downturn in diamond prices as a pressure tactic to push the Government for concessions. This is a reasonable supposition, especially after he was quoted in several articles, during the last few months, claiming that business at the mine was not affected by the downturn. Diamonds contribute to 25% of the Northwest Territories G.D.P. and Truter might be playing hardball when he says that without government help, he may be forced to abandon the site.

Bridal sales make up approximately 20 percent of retail jewellery business. Younger couples are having trouble making ends meet and are looking to cut expenses, as a result, laboratory grown diamonds are popular. These manufactured diamonds currently contribute to 50% of engagement sales by volume but only 25% by value. There is an inequity in marketing manufactured diamonds. The price is really going
down quickly but the number of couples getting married remains stagnant. Retailers claim that as the price of manufactured diamonds erodes, their bottom line also erodes. The revenue decline when selling the man-made product coupled with the stabilization of natural diamond prices is expected to increase demand for the natural product. Rob Bates reports that some retailers are finding that the price of man-made diamond reports is too high. Avi Krawitz points out that laboratory reports are problematic when
selling manufactured diamonds because they create an equivalence with the natural product. He says, “They imply that the 4Cs determine (the) value of (manufactured) diamonds in the same way they do for natural diamonds. This represents a major misrepresentation”.

Grown diamonds can be produced to fit predetermined cut, colour, clarity, and weight specifications. These specifications do not reflect the value of a manufactured product in the same manner as a natural occurring product. Natural diamond values are calculated by their rarity which is described in the criteria of a diamond report while the manufactured product is not rare.

The consumer needs to understand that these two types of diamonds are different. Their values are determined by different considerations. So, laboratory reports that use natural diamond terminology can be deceptive.

At this point manufactured diamonds are sold to consumers almost entirely for price and sold by retailers almost entirely for their large profit margins. As the price of manufactured diamonds drops, due to advancements in production and technology, both consumers and retailers respectively may grow to regret their buying and selling choices. Both consumers and retailers need to consider their long-term relationships, when buying and selling any product. Firstly, the long-term relationship the consumer has with their purchase and secondly, the long-term relationship that the retailer is building with their client.

… and that’s the Regal Imports News for October … I thank you very much for watching.

Mel Moss