{"id":26396,"date":"2024-06-13T11:42:07","date_gmt":"2024-06-13T06:12:07","guid":{"rendered":"https:\/\/gjepc.org\/solitaire\/?p=26396"},"modified":"2024-06-13T11:42:21","modified_gmt":"2024-06-13T06:12:21","slug":"diamond-industry-hits-supply-demand-fundamentals-with-one-two-punch","status":"publish","type":"post","link":"https:\/\/gjepc.org\/solitaire\/diamond-industry-hits-supply-demand-fundamentals-with-one-two-punch\/","title":{"rendered":"Diamond Industry Hits Supply\/Demand Fundamentals With One-Two Punch"},"content":{"rendered":"

Natural diamond production in 2024 is expected to drop to the lowest level since the pandemic, heralding a potentially transformative shift in the market dynamics. Industry heavyweights like De Beers and ALROSA are strategically cutting back production, setting the stage for a crucial period of inventory destocking and market recalibration, reveals Paul Zimnisky<\/strong>.<\/em><\/p>\n

The 2024 natural diamond production is forecasted at 113 million rough carats, which would be the lowest level of output since 2020, according to Paul Zimnisky estimates. For context, in 2020, the year the global economy shut down due to the pandemic, supply fell to 110 million carats, which marked the lowest level since the mid-1990s.<\/p>\n

De Beers, which remains the world\u2019s largest producer by value, cut 2024 production guidance by 10% in April and kept its May Sight under the $400 million psychological threshold. ALROSA, the world\u2019s largest producer by volume, publicised that Russia\u2019s precious metal and stone reserve, the Gokhran, bought the company\u2019s \u201centire cut of production\u201d in March \u2013 in effect taking the supply off the market.<\/p>\n

The diamond industry ostensibly needs reduced upstream production to let excess stocks accumulated last year to dissipate. According to Paul Zimnisky estimates, in Q1 of this year, global midstream inventories (encompassing traders and manufacturers) sat at the highest level since the global financial crisis of 2008-2009 (in value terms and not normalising for the impact of inflation).<\/p>\n

\"\"
Helped by the \u201csupply-side\u201d of the equation, in recent months industry destocking appears to be gradually taking place with midstream inventories estimated to be down about 5% as of mid-June from the end of March.<\/figcaption><\/figure>\n

Downstream, in the U.S. the consumer market is tepid but not cold as consumers grasp continued inflation impacts whilst employment conditions remain favourable as does a buoyant stock market. Interest rates is the U.S. remain at the highest level since 2007 following a historically aggressive sequence of rate hikes by the Federal Reserve over the last two years. Optimistically, the Fed now has room to cut rates and stimulate the economy if needed.<\/p>\n

In China, lacklustre consumer demand continues as uncertain economic conditions seem to prevail. Perhaps stimulus programs initiated by the government will offset some of the consumer apathy as the year progresses, however, a notable recovery in China\u2019s diamond trade is not expected until 2025.<\/p>\n

At the end of the day, diamond price fundamentals will ultimately need to be supported by demand \u2013 the factor least in control of the industry. That said, exogenous macro factors in the U.S. and China aside, an endogenous natural diamond marketing collaboration struck in May between De Beers and Signet Jewelers is encouraging.<\/p>\n

\"\"
Paul Zimnisky<\/figcaption><\/figure>\n

It\u2019s the largest diamond miner in the world and the largest diamond retailer in the world working together to promote the appeal of natural diamonds in a scheme that penetrates all the way down to the end of the supply chain.<\/p>\n

The strategy seems similar to what was formally De Beers\u2019 Diamond Promotion Service (DPS), a prong of the \u201cA Diamond is Forever\u201d campaign aimed at direct interaction with jewellers that included the training of front-line salespeople. The DPS was retired in 2010, amidst the restructuring of De Beers in the post-monopoly era.<\/p>\n

In just recent days, De Beers announced a similar collaboration with Chow Tai Fook, Greater China\u2019s largest jeweller. Both the Signet and Chow Tai Fook campaigns are expected to accelerate going into the holiday 2024 season.<\/p>\n

\n

Paul Zimnisky, CFA is an independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis and forecasts of the diamond industry please consider subscribing to his <\/em>State of the Diamond Market<\/em><\/a>, a leading monthly industry report; an index of previous editions can be found <\/em>here<\/em><\/a>. Also, listen to the <\/em>Paul Zimnisky Diamond Analytics Podcast<\/em><\/a> on Spotify or Apple Podcasts for exclusive full-length conversations with special guests from the gem and jewelry industry. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at <\/em>paul@paulzimnisky.com<\/em><\/a> and followed on X <\/em>@paulzimnisky<\/em><\/a>.<\/em><\/p>\n

Disclosure: At the time of writing Paul Zimnisky held a long equity position in Brilliant Earth Group and Newmont Corp. Paul is an independent board member of Lipari Diamond Mines, a privately-held Canadian company with an active mine in Brazil and a development-stage asset in Angola. Please read full disclosure at <\/em>www.paulzimnisky.com<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Natural diamond production in 2024 is expected to drop to the lowest level since the pandemic, heralding a potentially transformative shift in the market dynamics. Industry heavyweights like De Beers and ALROSA are strategically cutting back production, setting the stage for a crucial period of inventory destocking and market recalibration, reveals Paul Zimnisky. The 2024…<\/p>\n","protected":false},"author":7,"featured_media":26397,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[106,79],"tags":[],"thb-sponsors":[],"class_list":["post-26396","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-manufacturing","category-viewpoint"],"acf":[],"yoast_head":"\nDiamond Industry Hits Supply\/Demand Fundamentals With One-Two Punch - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/gjepc.org\/solitaire\/diamond-industry-hits-supply-demand-fundamentals-with-one-two-punch\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Diamond Industry Hits Supply\/Demand Fundamentals With One-Two Punch - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine\" \/>\n<meta property=\"og:description\" content=\"Natural diamond production in 2024 is expected to drop to the lowest level since the pandemic, heralding a potentially transformative shift in the market dynamics. 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