Editor’s Note
This report highlights a significant rebound in the diamond industry, driven by robust consumer demand. The sharp increase in sales and a substantial drawdown in inventories to a multi-year low suggest a strong recovery from the pandemic’s initial impact.
De Beers, the world’s largest diamond supplier, recently released its first-quarter production report for 2021. By the end of March, De Beers sold 13.5 million carats of rough diamonds, an increase of nearly twofold. Rough diamond inventory decreased by approximately 60% over the past six months to 12.8 million carats, the lowest level in nearly three years.
This indicates that the global diamond industry, after being impacted by the pandemic in early 2020, has begun to gradually recover. De Beers noted in the report that strong consumer demand for diamonds in China and the United States led this recovery, accounting for approximately 50% and 12% of the global diamond jewelry market share, respectively.
Positive signals from downstream sales quickly transmitted to upstream rough diamond mining. De Beers’ diamond production in South Africa increased by 55% in the first quarter. Botswana remains De Beers’ largest diamond source, with production of 4.96 million carats, accounting for over two-thirds of total output.
However, the midstream cutting and polishing sector has not fully benefited. The Rapaport Group recently reported that the new wave of the pandemic in India may reduce processed diamond output by 30% to 40%. This could lead to increased upstream rough diamond inventory and decreased downstream supply of processed diamonds, causing market price fluctuations.
India is one of the world’s largest diamond processing hubs. According to the Gem & Jewellery Export Promotion Council of India, India currently holds nearly 90% of the global diamond processing market share.
The city of Surat in Gujarat is the center of India’s diamond cutting and polishing industry. However, the Surat Diamond Association stated that the pandemic has not significantly impacted local diamond processing and sales operations, and workers are still reporting for duty normally.
To mitigate the adverse effects of recurring pandemics on diamond production and sales, De Beers is increasing investment in its lab-grown diamond business. According to Forbes, De Beers invested $94 million in 2020 in its lab-grown jewelry brand Lightbox to build a factory in Oregon, USA, to increase production capacity. The factory is expected to produce approximately 200,000 carats of lab-grown diamonds annually upon completion.
Although most traditional jewelry brands still keep their distance from the lab-grown diamond business, market trends are changing. A report jointly released by Bain & Company and the Antwerp World Diamond Centre shows that lab-grown diamond production reached 6 to 7 million carats in 2020, with retail prices falling further. The United States is the primary consumer market for lab-grown diamonds.
One reason driving some traditional jewelry brands to increase investment in lab-grown diamonds is that the younger generation’s demand for jewelry is no longer limited to wedding scenarios.
The trend towards diversified views on marriage and relationships in recent years has challenged the traditional marketing that binds jewelry to eternal love. Emphasizing that jewelry can also be worn in daily scenarios has become a new marketing trend. In 2020, Tiffany & Co., when promoting its newly launched T1 series, invited multiple celebrities and bloggers to share their wearing experiences in different life scenarios.
This also means jewelry brands need to further weigh product pricing to expand their consumer base and increase purchase frequency. Bain & Company noted in the report that lab-grown jewelry is about ten times cheaper than natural jewelry, and advancements in laboratory technology are making the distinction between lab-grown and natural jewelry increasingly smaller.
Beyond De Beers, Danish jewelry brand Pandora recently announced it will increase investment in its lab-grown jewelry business, stating it will gradually replace natural diamonds with lab-grown diamonds. This strategy will first be implemented in the UK market and rolled out to other countries starting in 2022.
According to The New York Times, Pandora produces about 8.5 million products annually, of which only about 50,000 are set with diamonds. Completely switching from natural to lab-grown diamonds in its products will not significantly impact Pandora’s business, but this move can also make the brand more aligned with the currently prominent sustainability议题 to some extent.
Pandora’s financial report shows its first-quarter 2021 revenue increased by 13% to 4.5 billion Danish kroner, with e-commerce business growing by 136%. Compared to the same period in 2019, Pandora’s quarterly revenue declined by 3%, but increased by 13% compared to the same period in 2020. Pandora stated in its report that strong demand in the US market drove revenue growth, but demand growth in the Chinese market remains weak, and more resources will be invested in the Chinese market in the future.