Diamonds may be a girl’s best friend, but volatility in the diamond market last year left boys and girls alike feeling less than friendly toward their precious gem investments.
Fortunately, in spite of last year’s unique challenges, the market managed to regain its composure and is poised for future growth.
Tapped Out and Locked Down
Global diamond production peaked back in 2017. Since then, mine output has steadily declined and isn’t projected to return to 2017 levels anytime soon. One of the world’s most prominent mines—the Argyle in Australia—shut down in November after 37 years of output. This was no surprise; the market saw it coming and adjusted accordingly.
What the market didn’t see coming was COVID-19 and its ramifications for both supply and demand. On the supply side, mining operations were significantly hampered by government-mandated lockdowns and ongoing complications with COVID precautions.
Diamond production in 2020 decreased by 20% compared with 2019 and remains somewhat subdued due more to mine depletion than COVID. In general, producers are back to their normal, everyday operations and rough diamond supply is climbing.
A Momentary Dip in Demand
U.S. jewelry store sales took a $4.7 billion˚ hit between the months of February and May. Thankfully, the second half of the year made a strong enough recovery to wash out those losses and leave 2020 jewelry sales even with what we saw in 2019.
As we’d expect, wholesale and rough diamond prices dropped correspondingly in the first half of 2020 and began to rebound as the jewelry market in general picked back up. Lab-grown diamonds followed a somewhat independent trajectory, ending the year with lower prices yet an increased share of the overall market.
This resurgence in post-lockdown jewelry shopping has continued through to today, creating a largely V-shaped recovery for the retail market. December, especially, proved helpful in recovering much of the year’s losses. While specialty jewelers typically see a 122% rise in sales over November, this past December they saw an increase of 160%.
COVID-19 still weighs heavy on the world economy. Though we’ve seen signs of recovery, this entire ordeal will make for a more cautious and conservative diamond market going forward.
On the retail side, we can expect to see an increased push towards online sales as retailers enhance their web experience for locked-down and quarantined shoppers.
As for the supply chain, experts predict that inventory will shift from the fragmented mainstream back to well-capitalized mining operations, making for a more stable supply dynamic.
We can also expect producers, wholesalers, and retailers to focus less on speculation and more on big data as they streamline operations and maximize returns. We saw this in Q4, when retailers lowered prices to boost sales, cut costs to protect their margins, and effectively forced their suppliers to do the same.
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