The curtailing of upstream and midstream natural diamond production in the past months is starting to have an effect on prices, according to the New-York-based independent diamond and jewellery analyst and consultant, Paul Zimnisky.
He told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that these could be the first signs of a recovery.
Zimnisky, however, cautioned that a meaningful recovery in demand is critical for a continued recovery.
He said China was key for the sustained recovery in demand.
Greater China was until 2023 regarded as the second largest market for the diamond industry, but it surrendered its position to India.
Zimnisky recently wrote that demand for diamonds from China is projected to have dropped by more than 50% with polished sales to the country seen between 20 and 40% of normal levels.
NB: Zimnisky produces, amongst other products, a leading subscription-based monthly report, The State of the Diamond Market and a regular podcast called the Paul Zimnisky Diamond Analytics Podcast. Paul will be speaking at the Bharat Diamond Bourse on October 11 in Mumbai and at INHORGENTA on February 22, 2025, in Munich. Zimnisky will also be in Surat in early-October, in Angola in late-October and in Milan and Rome in February 2025. He can be contacted at paul@paulzimnisky.com.
Below are excerpts from the interview.
What is the state of the natural diamond industry in the second half of the year?
I am actually just starting to see some support in both rough and polished prices through the end of August and into September. Upstream and midstream production has been significantly curtailed in recent months, and this is finally starting to have an effect on prices. So, hopefully, these are the first signs of a recovery. But at the end of the day, a meaningful recovery in demand is needed for a sustained recovery. Most notably, a recovery in China is needed, in my opinion.
Why is China key for the sustained recovery in demand for natural diamonds?
Over the last 25 years, Greater China has been [a significant] diamond market. It grew to the world’s second-largest consumer of diamonds, and it has represented the industry's fastest-growing large market. However, with demand estimated to be down as much as 50% this year, there is [much] room for a recovery there.
When do you anticipate the recovery of the natural diamond market?
I think we will see a recovery, albeit a gradual one. It probably won’t be until next year, until the excess stocks are worked through. The industry is doing a good job from a supply standpoint, but [again] I would really like to see a demand recovery in China.
What does De Beers' decision to skip its August rough sale and combine it with the October trading session in September mean about the prevailing market conditions?
It’s encouraging to see De Beers stepping up to do its part despite the company being up for sale. The De Beers supply cuts are significant, and this is certainly meaningful to industry fundamentals. Word is ALROSA is also practicing a price over volume strategy at the moment. Even independent players like Petra Diamonds and Okavango Diamond Company have limited sales. This is exactly what the industry should be doing right now.
How are production cuts in India affecting the natural diamond industry?
As with the upstream segment of the industry, the proactive measures taken by the midstream to cut supply are very encouraging. Again, this is exactly what the industry should be doing. Hats off to the trade for coming together and doing the right thing.
When is the situation expected to improve in India?
I think as soon as we start to see polished prices improve, you will start to see margins in manufacturing improve. Again, at the end of the day, a sustainable recovery in end-consumer demand will be the ultimate cure for what’s ailing the industry.
To what extent do the US elections impact the sales of natural diamond jewellery?
While there will be a lot of talk and media coverage of the elections in the U.S. in November, the reality is I would not expect an acute impact on the financial markets or economy, let alone diamond demand. I would maybe note that Biden is a lame duck, so we are going to have a new president next year, either Trump or Harris, and uncertainly is typically not good for the economy. But I mean, look, the stock market is at an all-time high right now, and we are only a few months away from a new president, so I think that kind of speaks for itself.
How effective is the De Beers' Origins strategy?
I think this is the right move for the industry. There is a great story to tell with natural diamonds, and I think historically the industry has undersold itself in this area. For it to be a success, it really needs to be properly marketed, though, in my opinion.
What has been the impact of the G7's ban on Russian diamonds on demand for natural diamonds produced by De Beers and other major producers?
The sanctions have really taken a back seat to other industry happenings in recent months. The implementation of the sanction’s protocols has really been laxed as the G7 authorities have acknowledged the concerns of the trade. I believe more technical tracking protocol requirements will be implemented, but in a way that limits disruption to the industry. From a supply disruption standpoint, given that the market has been overstocked, the impact of the sanctions has not really been felt yet, but I think it’s just a matter of time.
Mathew Nyaungwa, Editor in Chief, Rough&Polished
