Diamond demand, prices set to soar in next decade

Diamond demand, prices set to soar in next decade

Growing demand for diamonds led by the U.S. —the top retail market for precious gems-based jewellery—, followed by China and India, is expected to keep the global diamond market more than healthy in the next ten years, consultancy Bain said Tuesday.

In its fourth annual report on the industry, the experts warn that growth, however, may be jeopardized by lack of access to financing and the need for increased marketing.

According to the consultancy, the market expanded last year by between 2% and 4% at every point in the value chain, from mining to cutting and polishing, manufacturing and retail.

"Looking ahead to the next decade, the outlook should remain strong, as long as the industry can step up its focus on driving demand and sustaining a positive image for the market," the analysts say in the study “Diamonds: Timeless Gems in A Changing World.”

Diamond demand, prices set to soar in next decade

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Diamond demand, prices set to soar in next decade

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Challenges

They think the four major challenges in the decade to come are the lack of major underdeveloped diamond sites or discoveries, an increasing public awareness of environmental topics, the potential impact in local communities and a growing pressure on operating costs.

Still, Bain expects global supply to grow, on average, 3.5% to 4% until 2019, to then decline by 1.5% 2% until 2024, as a result of ageing mines and a shift to underground mining.

The report also notes the world of diamond retails is changing quickly, with more business specializing in diamond recycling, the surge of online stores such as Alibaba and Amazon, and retailers expanding their operations further upstream by setting up cutting and polishing operations.

Diamond demand, prices set to soar in next decade

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Key Findings

  • The diamond industry’s growth last year was centered primarily in the U.S., China and India.

The U.S. confirmed its position as the world’s leading diamond retail market, powered by economic growth of approximately 2% – a big improvement from the 1.6% decline posted during and immediately after the global financial crisis.

India and China continued to dominate the cutting and polishing and jewellery manufacturing sectors, respectively.

  • Bain’s proprietary forecasting method anticipates rough-diamond demand to grow at an average annual rate of 4-5% over the next decade in line with historic trends.

U.S. – Diamond consumption in the U.S. is expected to continue its current rebound trend of the past few years, before converging with its historical long-term growth rate in line with GDP and disposable income growth, which is expected to grow in the range of 2-3% over the next decade

China – Expansion of China’s middle class, a rising urban population and a spike in personal wealth should help the diamond jewellery market sustain strong growth.  Diamond demand is expected to double by 2024

India – In India, a revived economy and a middle class that is expected to grow 2.8 times by 2024 will deliver high single-digit growth for the country’s diamond jewellery market.

  • Global supply will grow, on average, 3.5- 4% during 2013-2019 and then decline by 1.5-2% through 2024, as a result of aging mines and a shift to underground mining.

Bain estimates supply will reach 163 million carats in 2019, which is below the pre-crisis production of 177 million carats in 2005, dropping to 163 million carats in 2008.

The full report is available here.