Despite efforts by major players like De Beers and the Natural Diamond Council, the natural diamond industry faces significant challenges. For decades, diamonds were marketed as rare symbols of love and wealth, but consumers are increasingly skeptical of this narrative. The industry’s struggles reflect a broader shift in how buyers perceive value and transparency.
A key indicator of these challenges is De Beers‘ valuation, which has plummeted to around US$1 billion amid a prolonged downturn. While the company reduced its first-half underlying loss to US$188 million through cost-cutting, the industry remains under financial pressure, highlighting deeper structural issues.
Industry Faces Continuing Financial Pressure
Supporters argue that supply constraints and improving market sentiment, particularly in India, offer hope, while the United States market remains stable. However, these factors have yet to significantly boost diamond prices or reduce inventory levels across the board.
Trade policies have created uneven playing fields, with Belgium, Botswana, and Namibia enjoying zero US tariffs, while Indian goods face a 10 percent tariff and Israeli exports incur higher duties. These disparities further complicate the industry’s recovery efforts.
The traditional diamond business model is under unprecedented strain as consumers demand greater transparency and question the resale value of their purchases. Many now realize that mining companies, wholesalers, and luxury retailers capture the bulk of profits, while individual buyers often face limited resale opportunities for their high-priced acquisitions.
Amid this turmoil, the industry’s struggles extend beyond market fluctuations. Consumers are prioritizing transparency, affordability, and long-term financial considerations, increasingly valuing genuine worth over branding and marketing narratives. This shift shows the need for the industry to adapt to changing expectations.
Demand for diamonds weighing two carats and above remains relatively strong, driven by limited rough supplies controlled by a few companies. For instance, Gem Diamonds reported a 33 percent year-on-year increase in first-half sales to US$59.5 million, with average prices rising 38 percent to US$1,395 per carat.
Related Post: De Beers Study Reveals US Diamond Demand Shift
Luxury groups like LVMH and Kering have also seen robust jewelry sales in the United States and Asia. However, analysts caution that luxury performance does not reflect the broader diamond market, as affluent buyers often prioritize craftsmanship and prestige over the intrinsic value of the stones.
Fancy-shaped diamonds, especially elongated cuts, are gaining popularity, with marquise diamonds commanding the highest prices. Long cushions are trading at premiums of 20 to 25 percent over square cuts, reflecting evolving consumer preferences.
The United States market remains stable, with expectations of increased retail purchases post-summer. Dealers note challenges in replenishing quality inventory, while lower-color diamonds attract value-conscious buyers. Belgium’s diamond trade has been quiet during the summer, though its tariff advantages may enhance Antwerp’s competitiveness in larger diamond manufacturing.
Israel faces ongoing challenges due to higher US tariffs and the resignation of Israel Diamond Exchange President Nissim Zuaretz, adding uncertainty to an already difficult trading environment. In contrast, India shows optimism ahead of the IIJS exhibition in Mumbai, with tighter inventory, firmer prices, and improved demand in select categories.
Regional trends vary, with Hong Kong focusing on larger certified diamonds and China’s wholesale market showing modest improvement, primarily for one to two-carat certified stones.
Traders expect strong domestic jewelry sales in India during Diwali, supported by tight inventory and firmer prices. Demand for specific categories has shown encouraging signs of improvement.
Challenges Ahead for the Industry
Lab-grown diamonds have intensified competition, while consumers are increasingly aware of resale values and pricing structures. The industry’s profit distribution across the supply chain is under growing scrutiny.
