DIAMOND FEATURE Understanding Uncertainty UNDERSTANDING Gal Gadot for Tiffany & Co. Inset: Harry Winston pendants. UNCERTAINTY <strong>2022</strong> has been another year of remarkable uncertainty for the international diamond industry. SAMUEL ORD explores some of the more significant international trends.
Ellendale Diamonds De Beers As retailers bravely march towards the most significant sales period of the year – December – it’s important not only to prepare for the future but also to reflect on how significant of year <strong>2022</strong> has been for the world of white diamonds and diamond jewellery. Of course everything changed in 2020 – the COVID pandemic stopped international travel and trade suffered dramatically as a result. As industry analyst Chaim Even Zohar explains “Twentytwenty always had a nice ring to it, and in the run-up to it, many entities, both companies and international bodies drew up their vision statements. However, 2020 turned out to be quite the contrary and will be remembered for a long time for all the wrong reasons.” Then 2021 was the year the jewellery industry prayed would bring about a reversal of all that unfolded in the preceding year. For many Australians, restrictions remained in place – however internationally, the diamond sector rebounded. “The entire industry not only saw a surge in sales after the COVID outbreak in 2020, but also experienced one of its most profitable years, something for which it had been yearning. 2021 helped the industry ‘right-size’ its inventories and bring the overall business model back in line with what it should be,” writes industry expert Pranay Narvekar. <strong>2022</strong> came around, the new year presented itself as an opportunity to return to normality and in the opening months all early signs were cautiously optimistic – until February. Russia invaded Ukraine, prompting governmental and corporate powers to take action, levying sanctions against the country responsible for more than one third of the world’s supply of rough. Now, with three quarters of <strong>2022</strong> passed, diamond market sentiment remains as mixed as could be. Edahn Golan, an industry analyst with more than two decades experience studying the market, echoed this sentiment – particularly in relation to jewellery demand within the US. “<strong>Jeweller</strong>y sales boasted an impressive performance in the first half of <strong>2022</strong>. Sales rose nearly across the board – a particularly impressive act against the excellent performance of 2021,” Golan says. “However, as the months went by, sales deteriorated until they fell behind in June. “The average retail price per unit fluctuated during the six-month period, and yet, stayed at a double-digit rise compared to the previous year. There is only one explanation STATISTICS Diamonds in Data 4 Number of countries within which De Beers mines for diamonds $630m De Beers rough sales in the seventh cycle of this year 66% Alrosa's stateownership by Russia, Yakutia and the Yakut regions 109.9 The weight in carats of the Alrosa Spectactle, the biggest diamond ever cut in Russia $250m Alrosa's estimated each month in <strong>2022</strong> 105.6 The weight in carats of the Koh-i-Noor which sits in the Imperial State Crown for this: A sizeable chunk of American consumers are continuing to display a healthy appetite for jewellery, with a specific craving for higher-end goods.” Global diamond production recovered in 2021 following the impact of the international pandemic, however, according to Golan the revival didn’t reverse the long term trend of production slowly declining. “<strong>Jeweller</strong>y sales boasted an impressive performance in the first half of <strong>2022</strong>. Sales rose nearly across the board – a particularly impressive act against the excellent performance of 2021.” - EDAHN GOLAN - “The repeated - and often delayed - forecast that production will fall and consumer demand will rise is starting to materialize. But will demand continue to grow?” asks Golan. “That is really in the hands of the diamond industry and its efforts to market diamonds to a generation of consumers that has concerns about the environment. He added “The average value of rough diamonds exported by producers was up to a record high against rising demand and energy costs. But is it sustainable? With a decline in polished diamond prices, producers may be forced to reduce prices.” Conflicting forces In order to get an accurate read on a complex situation, it’s often recommended that one goes back to the basics. Martin Rapaport – chairman of the Rapaport Group – says that the key to understanding the confusion and uncertainty of the international diamond industry is to grasp the role played by contrasting and conflicting powers. “We are going through a period of unprecedented changes and it can be very confusing and difficult to understand. While we travel through this period of unprecedented uncertainty, you might want to take the time to think about what it is we do know,” he explains. “We have data that tells us that there is a certain number of diamond mines and diamond factories on the supply side. On the demand side, there are a certain number of stores, a certain number of consumers and each year, there’s a certain number of marriages – we have these facts. He continues: “We must remember that it is not supply that sets prices. Demand is what sets prices.” Tighter supply of rough diamonds has traditionally led to higher prices – an outcome some experts foreshadowed <strong>October</strong> <strong>2022</strong> | 51
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