Is the Industry Nearing a Supercycle?
In a recent article titled “On the cusp of a diamond supercycle”, written by Igor Leikin for Rough & Polished, the writer analyzes the current diamond market, including sales, prices, and midstream and retail trends, to show that the industry may be nearing a “possible forming of a supercycle in the diamond market.” Here are some of his salient points.
According to Leikin, diamond sales slowed seasonally in Q2, but there were notable sales rises in June for both De Beers and Alrosa, following an improvement in the Covid-19 situation in India.
The outlook for rough diamond sales in July-August, says Leikin, “remains optimistic, given that coronavirus-related restrictions in India have been almost completely lifted, and the diamond cutters’ inventory levels remain relatively low […]”.
In addition to improved sales, the market – at least according to a recent statement by Alrosa – is entering “a period of a prolonged shortage of rough diamonds when supply will not match demand due to limited inventories of the mining companies and midstream.”
According to a recent BCS report, “the current limited supply of rough diamonds coupled with strong demand leaves no choice but to balance the market through higher prices[…]”.
Leikin goes on to talk about rough vs. polished prices, noting that “the dynamics of the rough diamond price is far ahead of the dynamics of the polished diamonds.”
The rest of the article is dedicated to discussing the diamond midstream (especially affected by the situation in the Indian cutting and polishing industry); retail (trends in end-user demand, consumer confidence in key markets and inventories in retail); and rough production dynamics by the major miners (increased or decreased carat production by year’s end).