Editor’s Note
The global diamond market is undergoing a significant correction, with natural diamond prices retreating sharply from their peaks. This article examines the factors behind this decline, including substantial price cuts by major suppliers and shifting consumer trends.
Globally, the price of natural diamonds has fallen by over 13% this year, marking a 24.6% retreat from previous historical highs. Natural diamonds, also known as rough diamonds, refer to uncut or minimally processed diamond rough. Over the past year, De Beers, the world’s largest diamond supplier, has slashed the price of its mainstream products (2-4 carat natural diamonds) by 40%. These diamonds once commanded a high price of $2,400 per carat, but by July this year, the price had dropped to around $850 per carat.
The International Diamond Exchange (IDEX) Diamond Price Index reached a historical peak of 158 in March 2022, then fell continuously to around 110 currently, hitting a new five-year low—a drop of about 30%.
High global inflation has made consumers more cautious about spending on gold, silver, and jewelry. Gold, with its rising prices, clearly offers better value preservation and appreciation potential than diamonds. Beyond this, the impact of lab-grown diamonds is a significant reason for the depreciation of natural diamonds.
Lab-grown diamonds, also known as cultured diamonds, are manufactured in laboratories or factories and share identical chemical, optical, and physical properties and crystal structure with natural diamonds. Their selling price is only about one-third that of natural diamonds.
The existence of lab-grown diamonds alone was not enough to shake the market position of natural diamonds. However, in a context of rising living costs, lab-grown diamonds, with their mature production technology and lower cost, better align with consumer demand. Furthermore, the lower cost of lab-grown diamonds allows for greater designer creativity, making them an attractive, fashionable choice for younger demographics.
In reality, global diamond prices experienced several sharp increases after the 2020 pandemic, peaking in 2022. A report by Guosheng Securities noted that natural diamond reserves are limited, and the pandemic severely disrupted normal mining operations, exacerbating supply pressures. In 2020, global rough diamond production fell by 20% year-on-year.
In 2021 alone, De Beers adjusted rough diamond prices six times, citing reduced rough output and strong market demand leading to a supply shortage, pushing prices far above pre-pandemic levels.
Some analysts believe the current price adjustment is normal following the sharp pandemic-driven increases.
According to the China Diamond Price Index Research Group, due to slowing demand in major retail markets like the US and China, purchases of polished diamonds have decreased. This has led to increased inventory in the cutting, polishing, and wholesale segments of polished diamonds. It is estimated that polished diamond inventory in the midstream of the natural diamond supply chain has increased by 30% year-on-year.
They also noted that if the drop in rough diamonds is only temporary, it may not necessarily be reflected in finished product sales. The price composition of diamond products is relatively complex. For designed pieces, costs include not only the rough stone itself but also setting metals, other gemstones, design fees, labor costs, and brand premiums.
Regardless, as the diamond’s allure fades, natural diamond merchants will face difficult times. For consumers, how much appeal does a diamond that doesn’t hold its value still have?