The Great Diamond Slowdown of 2016, and Why We Need a Fresh Approach

(ehudlaniado.com) - We are in the middle of the summer, and trade has shifted gears to a slower pace. In August, many go on vacation, and the coming month is expected to be even slower than July. The reasons for this slowdown are clear: a decline in consumer demand for diamond jewelry in the US, a yearlong drop in consumer demand in China that did not improve during the February holiday period, and which remains low. In Japan, demand has been declining for more than a year, and in India, the expected rise in demand is not materializing. Logic suggests that the weak demand for diamond jewelry translates into weak demand for polished, which in turn should result in a decline in rough diamond demand. Has that happened? De Beers reported its half year results, stating that sales volume increased more than 29% to 17.2 million carats, and revenue from rough diamond sales increased 11% to $3.1 billion. This means that the market purchased more rough diamonds during a period when demand from the consumer market has actually been in significant decline. The result of this behavior is that there is an oversupply of polished diamonds and this pushes their prices down. It’s a vicious cycle that hurts margins, profitability and viability.