Diamond Market News

Posted on September 1, 2021 by Jon C. Phillips, GIA GG, CG (AGS)

Prices Rise Amid Rough Shortages – is the bubble about to burst? Shortages of rough and increased consumer demand are driving monthly price increases. Predictions of a slowdown in spring did not happen. Inventories at very low levels. There was a backlog of grading services in Mumbai due to COVID-19. Major producers and retailers riding the wave. Lucara Diamond Corp. unearths some incredible diamonds. Every month now for more than a year, polished prices have risen. Slowly at first but lately we have seen monthly increases in the 2-7% range, especially in the sizes of 2.00 ct down to 0.50 ct. What’s fueling these increases? Well, that’s seemingly not a straightforward answer and some of the latest increases defy standard business logic, while others we should have seen coming. It all started with the pandemic of 2019-20 and essentially the shutdown of the mine to market pipeline for diamonds. From temporarily closing some mines to the reduced production of others, it stemmed the flow of rough diamonds into the marketplace. This was not a problem at the time as manufacturers were shutdown and retailers were essentially closed for the first three quarters of 2020. All the suppliers that were open relied on in-house inventory and drained the backlog that had built up since 2017-18. You’ve probably heard all this before so what else happened to fuel the steady increase in prices in 2021? Supply and demand economics is what happened—because it wasn’t just shortages of rough. It was also the immense, unexpected, and continued consumer demand for all diamonds both natural and lab grown. Edahn Golan, a recognized diamond journalist, tracked actual wholesale polished price increases year over year and by his calculation they have risen an incredible 24.7% in the last year—a price increase stretch that we haven’t seen for at least ten years. Figure 1. FIGURE 1. Graph courtesy of Edahn Golan. Sure, everyone expected a rebound effect when the market opened in earnest earlier this year but virtually no one expected it to last this long. Most pundits, myself included, predicted a slowdown or crash to happen in late spring. However, there was, and still is, a new fever to buy diamonds for engagements, weddings and just ‘plain old’ gifts. There is a predication now that 2022 will be the year of the wedding in a BIG way. Diamond producers’ inventories are now estimated to be at the lowest level in several years. Alrosa’s management noted that after destocking in the first part of 2021, the company’s rough diamond inventories are at a “historic low level” and approaching the deficit territory. There are gaps in inventories we haven’t seen for years. To obtain additional rough, Alrosa bought about 70% of the rough that they could from the Gokhran, the Russian state diamond registry. This is a very unusual situation as Alrosa normally sells off extra rough to the Gokhran to remain profitable on the...

GemWorld articles are accessible by GemGuide members only. To access our archive of articles and get many other great features and benefits, become a member now!

Become a member