Feb 08, 2022

AWDC & Bain Report: Diamond Industry Saw Brilliant Turn of Fortune In 2021

The diamond industry proved its resilience, by delivering excellent figures in every segment of the pipeline in 2021, and is well-positioned for the future, according to the findings of Bain & Company and the Antwerp World Diamond Centre’s (AWDC’s) 11th annual Global Diamond Industry Report 2021-2022, titled ‘A Brilliant Recovery Shapes Up’.

The report looks at the pandemic’s effects, the industry’s impressive recovery, and the possibilities ahead. In the past two covid-years, the industry invested heavily in technology to gain operational efficiency, create marketing and consumer experiences that attracted buyers, and accelerate e-commerce schemes, it noted.

In 2021, revenue increased 62% in the diamond mining segment, 55% for cutting and polishing, and 29% for diamond jewellery retail—all rising above pre-pandemic levels (+13%, +16%, +11%, respectively), the report states. The trend was consistent with previous economic downturns, when the diamond industry recovered with high double-digit growth within 12 to 18 months after a crisis peak.

Demand for diamonds was strong throughout 2021, especially in H2 2021. Strong retail demand for diamond jewellery drove up prices and profit margins along the value chain. As rough diamond sales increased, miners increased production volumes and pulled from inventories to keep cutters and polishers busy. Healthy demand and price recovery for polished diamonds helped the midstream achieve decade-high margins.

The report said upstream margins increased roughly 9–11 percentage points (p.p.), reaching 2018–19 levels. The midstream and retail segments both achieved decade-high profitability, growing 3–5 p.p. and 6–8 p.p., respectively. Combined, mining and retail players generated $7 billion more profit in 2021 compared to 2020.

The diamond jewellery market experienced a decade-high growth of 29% in 2021 because of continuing consumer desire for emotional gifting in difficult times, increased savings, limited availability of experience-based substitutes, and restricted travel – all of which boosted diamond jewellery purchasing in 2021.

AWDC and Bain & Co. expect the diamond market will be strong throughout the first half of 2022, supporting growth across all segments. After that, two possible scenarios emerge: “continued rebound” and “short-term readjustment”.

In the “continued rebound” scenario, diamond jewellery sales are expected to continue to flourish, creating strong demand and continued growth which will benefit players throughout the value chain.

The “short-term readjustment” scenario implies a possible slight correction in diamond jewellery demand starting toward the end of 2022 and the beginning of 2023, with a gradual return to pre-pandemic trend levels and growth rates in 2024—similar to how the diamond market strongly rebounded and then readjusted to its historic trajectory during past recessions.