Millennials gave a $25 billion shot in the arm to the diamond industry last year
While demand for rough diamonds fell last year, young consumers helped boost sales for precious gems used in jewellery spending more than $25 billion on it, more than any other generation to date, a report by DeBeers shows.
According to the study published Wednesday, the so-called Millennials (those aged 15-34 as per 2015) accounted for almost 50% of the total retail value of new diamond jewellery acquire in the four largest markets — the US, China, Japan and India.
The figure is particularly encouraging when considered that Millennials are still 10 years away from reaching their most affluent stage in life, says De Beers, which is the world’s biggest diamond producer.
The company says the generation presents a significant opportunity for the sector to capitalize fully on more than 220 million potential diamond consumers, the sector’s largest growth opportunity.
The industry overview, the third since De Beers first published its first Diamond Insight Report in 2014, warns however that many of the challenges affecting the global diamond industry last year are likely to continue over the next decade.
Be Beers says the global diamond industry is likely to experience increased volatility due to fluctuating global growth.
China and India will continue to drive demand for precious gems, especially as those countries are predicted to experience an increase in average household income over the next decade.
At the same time, consumer demographics will continue to evolve, with retiring and elderly consumers generating the majority of global urban consumption growth by 2030, and with Millennials becoming the largest age cohort in the US.
Financing challenges are expected to persist, says De Beers, driven by tighter lending standards and less availability, placing additional pressures particularly on midstream players with outdated and unprofitable business models.
Costs, in turn, will remain high, as miners are now digging deeper into existing operations and additional investment is required to drive productivity. Additionally, the imminent start of mining at three new diamond operations, including Gahcho Kué in Canada’s Northwest Territories and Stornoway’s Renard mine in Quebec, are expected to add around seven million carats annually to global production once fully operational, which is likely to affect prices
The company also expects that continued innovation by global players will generate strong competition from other luxury categories, as well as from synthetic diamonds, which are cheaper to produce.
A number of actions taken in 2015 by companies to address issues related to supply, demand and profitability, are bearing fruits, concludes de Beers, which expects a return to more normal trading conditions this year.
Anglo American (LON:AAL), which 85% of De Beers, has set diamonds, precious metals and copper at the core of its restructured portfolio.