At a meeting with representatives of leading Russian media, ALROSA's head of corporate finance Sergey Takhiev said that high jewelry demand and a 20% decline in global diamond production from levels seen five years ago would become key factors of growth for the industry.
Diamond prices on the world market are at multi-year lows, according to Rapaport. The price index for 1-carat stones as of November 1 fell by 22% compared to the same date in 2023 and by 23% since the beginning of the year, and amounted to 4.62 points. This is the lowest value since January 2015. Nevertheless, diamond demand is expected to increase thanks to lower stocks at India manufacturing centres which account for about 90% of all global diamond cutting. Global diamond mining companies would also adjust their production volumes.
When asked about his opinion on when diamond inventories would decrease enough to start being replenished again, Takhiev replied that it is a matter of several months. A gradual normalization of rough and polished diamond stocks is expected throughout the entire chain - from manufacturing to retail. This should become a driver for a reversal in prices for both rough and polished diamonds. The price growth will be supported by a significant demand for jewelry products as diamond mining capacity would decrease substantially as compared to 2018-2019 levels, by up to 20%.
As Takhiev noted, naturally-occurring depletion of the world's resource base has led to a decline in diamond production in recent years, while luxury and jewelry market volumes increased. Both factors will ensure growth in diamond prices in the long term.
According to Alfa-Bank analyst Yulia Tolstykh, risks associated with laboratory-grown diamonds (LGD) replacing natural diamonds in the jewelry industry is now relatively low. Wholesale LGD prices are now close to the prices of moissanite and zirconium, and their discount to natural stones exceeds 98%. According to her, "the market has put everything in place: artificial stones are now in a separate product niche of fashion jewelry."
Tolstykh estimates the potential for further recovery in rough diamond prices at 50% from current levels as “prices are under pressure due to excess inventory levels in the system,” which, according to her, will reach a state of equilibrium within the next three to four months.
The analyst noted sales dynamics and market prospects in China - over the past year, luxury goods sales to Chinese citizens, including diamond jewelry, have increased significantly outside the country thanks to lifting of pandemic-related restrictions. In her opinion, sales recovery in mainland China is slowed down but on the other hand, jewelry sales in countries that are popular with Chinese tourists, mainly Japan, may increase.
"The price difference (jewelry is 20% - 30% more expensive in China), the range, novelty, authenticity and other factors, have led to a geographical shift of Chinese luxury demand to other regions, although it remains relatively high. At the same time, the growth potential for diamond jewelry demand in China itself remains incredibly high," she noted.
According to Tolstykh, the importance of China, India and other Asian markets such as the developing countries of Southeast Asia and the Persian Gulf for stakeholders and diamond traders will increasingly increase. These regions have a significant growth potential in the next 10-15 years, given their socio-cultural dynamics and the growth of residents' well-being. At the same time, the younger generation, up to 40 years old, according to various studies, prefers to purchase luxury goods, primarily branded goods. Companies in the jewelry segment and the diamond industry as a whole, she advises, should formulate their strategies taking these realities into account.
Galina Semyonova, Editor in Chief of the Russian Bureau, Rough&Polished
