A diamond necklace in a Harrods division retailer in London.
Leon Neal | Afp | Getty Photographs
“A diamond is eternally,” however maybe not for the rising variety of shoppers spurning the gemstone for lab-grown counterparts, gold and even different coloured gem stones.
The slogan was coined by diamond large De Beers in 1948, capturing the impression of safety and romance. However not all relationships face up to the take a look at of time.
The corporate’s largest shareholder Anglo American plans to divest De Beers because it restructures its enterprise after rejecting a takeover bid from BHP. Anglo American CEO Duncan Wanblad advised the Monetary Occasions that promoting De Beers shall be “the toughest half” of the corporate’s radical restructuring.
“Diamonds do not actually slot in anymore regardless of the sturdy legacy of De Beers underneath Anglo,” stated impartial diamond business analyst Paul Zimnisky.
“Anglo is in the end going to do what its shareholders need, and it appears they wish to give attention to a longer-term technique of commodities that help the inexperienced infrastructure buildout, for instance copper,” he advised CNBC.
Dwindling diamond demand
The demand for diamonds has declined as its attract fades in a key shopper market: China.
Declining marriage charges in addition to rising reputation for gold and lab-grown gems all drove down Chinese language demand for diamonds, stated market analysis agency Daxue Consulting. The tip of pandemic restrictions additionally noticed shoppers channeling their spending towards journey experiences as a substitute of diamond merchandise.
Diamond costs have fallen 5.7% up to now this yr, in keeping with Zimnisky’s tough diamond index, declining greater than 30% from their all-time excessive in 2022.
De Beers as soon as commanded a monopoly on the diamond market, however its share has fallen. Financial circumstances led the corporate to slicing costs by 10% in the beginning of the yr, Bloomberg reported citing sources.
“Final yr was a a lot more durable interval for the [diamond] business as financial challenges, a post-Covid lull in engagements and a development in provide of lab-grown diamonds all affected demand circumstances,” Anglo American’s head of communications Marcelo Esquivel advised CNBC.
The core challenge is the speedy development of lab-grown diamonds.
The desire for lab-grown diamonds additionally performs a important function in driving down costs of pure diamonds, stated Ankur Daga, founder and CEO of superb jewellery e-commerce firm Angara.
“The core challenge is the speedy development of lab-grown diamonds,” he stated. Daga added that within the U.S., which is the second largest shopper of diamonds, half of engagement ring stones shall be lab grown this yr, up from simply 2% in 2018.
Lab-grown diamonds, which might be as much as 85% cheaper than pure diamonds, are made in a managed surroundings utilizing excessive strain and warmth. The method recreates how pure diamonds are solid deep within the Earth’s mantle. Lab-grown diamond gross sales have surged from simply 2% of the worldwide diamond jewellery market in 2017 to 18.4% in 2023, in keeping with knowledge offered by Zimnisky.
Moreover, the case for getting diamonds as an funding has dwindled, Daga stated. Diamonds had been seen as an asset and inflation hedge during the last 50 years, he elaborated. However that funding rationale has largely light as costs plunge.
An business ‘in bother’
“The diamond business is in bother,” Daga advised CNBC, including that he believes pure diamond costs might fall one other 15%-20% over the subsequent 12 months.
Some are a bit extra hopeful.
“There isn’t any doubt that there are some challenges within the diamond business, however they don’t seem to be challenges that may’t be addressed,” stated Anish Aggarwal, co-founder of specialist diamond advisory agency Gemdax.
He famous diamonds are discretionary merchandise and it is a case of “creating the need” for it, as with the case for different luxurious segments like high-end watches and baggage.
Just like a pure diamond, a lab-grown diamond is graded based mostly on the 4Cs — readability, colour, minimize and carat weight.
Lionel Bonaventure | Afp | Getty Photographs
“The business has not achieved giant scale class advertising and marketing for nearly 20 years. And we’re seeing the aftermath of that,” Aggarwal stated, including that the diamond business might want to work arduous to reignite Chinese language shopper demand.
This requires a cohesive advertising and marketing method, Aggarwal added. Equally, Zimnisky echoed that significant business advertising and marketing might simply flip the diamond market on its head.
Only recently, the world’s largest jewellery retailer Signet Jewelers introduced a advertising and marketing collaboration with De Beers to propel demand for pure diamonds. Signet is anticipating a 25% upswing in engagements over the subsequent three years.
Anglo American’s Esquivel additionally notes that larger engagements and climbing disposable incomes would assist alleviate challenges out there.
“It is the most important diamond miner on this planet and the most important diamond retailer on this planet working collectively, so it is vital and will actually transfer the needle for the bigger business,” stated Zimnisky.
