In the next 8 years demand for diamonds will grow at a rate of 5.9%, while mining companies will be able to increase their rough supply by only 2.7%.
“China and India will drive the growth,” said Olya Linde during the presentation of the latest Bain & Company report on the global diamond industry. “What is important is that we expect 200 million additional middle-class households from these two countries”.
The Bain report showed that when people reach the middle-class income threshold, they tend to start buying diamond jewellery.
Unbalanced Supply-Demand
Despite a prospected increase in rough extraction, mining companies will not be able to replicate the pre-crisis levels of 2005-2008. Most of the growth will come from new mines, as existing ones are depleting. The mines that will drive the bulk of future production are Bunder, India (Rio Tinto), Gahcho Kué, Canada (De Beers/Mountain Province), Lomonosov, Russia (ALROSA) and Grib, Russia (Lukoil).
Marange in Zimbabwe is not expected to play a major role, as the quality of the diamonds extracted there is lower compared with production from ALROSA, De Beers and Rio Tinto.
Global production volume will not be able to cope with the rise of the middle class in China and India. Statistics proved that in China the percentage of women owning a diamond jewel triples when the household family income raises from less than 3,500 US$ to between 3,500 and 10,000 US$. In India diamond penetration is stronger at all income levels. As 200 million households are expected to enter the middle-class ranking by 2020, diamond jewellery demand will not stop its rise.
Bain also took in account possible but unlikely instabilities in the diamond market, such as the rise of diamonds as investment, unexpected supply increases, larger use of synthetic diamonds or decline in demand.
The US will remain the biggest market, but China and India are closing in
The US market is still the largest in terms of jewellery, covering between 35 and 40% of the global demand. Diamond jewellery accounts for 55% of the market, down from 65% in 2005 but rebounding after the 2007-2008 collapse. While engagements remain the biggest driver in diamond purchases, this practise is shrinking by 3-5% after a peak in the early 2000s.
In just 7 years the Chinese jewellery market has tripled, overtaking Japan and the European Union in terms of volume and becoming the 2nd market with a 15% share in world diamond jewellery sales. India also tripled its jewellery market, closely following China in the global ranking. Competitors are falling behind: jewellery sales in Europe and Japan shrunk by 6-7% between 2010 and 2011, while the Persian Gulf countries, shattered by the Arab Spring, registered a -17%.
Different Countries, different consumers
The report also presented a detailed consumer analysis of the largest world markets. Around 13.000 women were interviewed, 5.000 of whom owned at least a diamond jewellery piece.
Diamond jewellery is considered the favourite present women like to receive in almost all of the examined countries, and ranks among the top three in all of the others.
When buying diamonds, Western customers are mostly concerned by retail service quality, while emerging markets are particularly interested in quality certificates.
Jewellery branding is important, but apart from a few big names in the business (Tiffany, Cartier, Bulgari) emerging markets tend to rely on local firms, such as Tanishq and Nashatra in India, or Chow Tai Fook in China.
The full report will be available for download at the Bain & Company and the Antwerp World Diamond Centre websites.
Matteo Butera, Rough&Polished
