Currently, the market is slowing down in preparation for the Diwali holidays in early November. In general, since De Beers brought prices into line with the market in September, the rough market has seen less volatility in price.
The 7th Dubai Diamond Conference took place between 25th–27th October. Although overall numbers appeared to be down on previous events, there was strong representation from producer countries, Angola, Botswana and Namibia, alongside a broad representation from the Dubai industry.
The theme of the event was the need to deliver a complete reset within the industry. This would see producers, traders and retailers working collectively to establish a fresh way to emphasise scarcity, provenance and craftsmanship to promote, market and sell natural diamonds in the face of the severe current challenges faced.
The largest of these being synthetic diamonds, which have now taken a 61% share of the hugely important US bridal sector, resulting in the collapse in prices of rough diamonds below 2 carats.
As an example, the conference drew parallels with the Swiss watch industry, which in the 70s faced a quartz watch revolution, which threatened to destroy traditional watchmaking and employment within the industry.
In their case, the introduction of Swatch aimed to restore competitiveness at the more affordable end, while a strong push in the luxury segment of high-end brands created watches prized for craftsmanship and desired for rarity and heritage.
Not everyone at the conference was convinced that, in the case of rough diamonds, focusing on pushing up prices in the larger, more exclusive end of the market, which is entirely possible, while ceding the bulk of production (80% of global rough production is below 2cts) to synthetic diamonds could sustain the economic viability of a diamond mine.
What is clear is that a continuation of the industry behaviour as it stands will not weather the storm.
With rough prices down in the region of 50% since 2021, smaller mines continue to face closure. This month, Petra joined the growing list of well-established names facing difficulty. Its share price fell 26% following a delay in producing its audit and consequently missing the deadline to produce annual results. Shares in the company were expected to be suspended from listing and trading from early November.
The new ownership of De Beers continues to be discussed. As widely publicised, the Global Diamond Consortium, the forerunner in the bid, are believed to have received offers of minority bids from both Sterling, America's largest jewellery retailer, and Richemont Group. The consortium would therefore additionally contain three or four Sightholders, plus the governments of Angola and Namibia have shown interest, and naturally Botswana, looking to increase its share of De Beers from 15% to 25%.
This broad range of partners and interests has created a lot of debate as to how the individual investors will gain and what it might mean for the rest of the market. We believe an official announcement should be forthcoming in the next few weeks. Whatever the outcome, it seems unlikely that a conclusion to the De Beers story alone will bring an instant injection of security to the industry, which many hoped for in the early days of the discussions.
The priority will be to get De Beers back on track, addressing the structural changes and cuts required to put the company on a solid financial footing. As addressed at length during the Dubai Conference, the collective action of the industry will be needed to address the deep problems within the industry. In theory, correct investment could drive consumer demand back into the underperforming segments of the market, if the desire for ‘natural’ diamonds can be created through dedicated marketing efforts.
ROUGH
Following the brief uptick in the rough grainers and smalls market previously reported in September, the large volumes of goods sold once again dampened demand.
Alrosa sold significant quantities of smaller sizes into the market, the result of which was an immediate 10% fall in price on the market and a reduction in demand. These goods had finally stabilised in price, and demand was returning in smaller sizes and cheaper ranges, which had been problematic for so long.
With the Indian industry approaching the holiday period and factory closures, De Beers October Sight 9 saw prices remain unchanged, and, as expected before Diwali, the volume was relatively small at between $125–$150m. It is understood that several Indian companies did not take their allocations, preferring to buy next month when factories reopen.
Demand remains strong for goods +2cts, and this extends to 3–6grs, which are enjoying steady demand. There is clearly a shortage of 5–10ct sizes, be they from the primary sources or on the secondary market. Small sizes below 3grs are in less demand as inventory levels are fulfilled, but prices have not decreased further since last month, and hopefully demand will return after Diwali. Larger stones +10ct and fancy colours remain in very good demand.
The absence of both the Angolan Catoca and Luelle productions has helped the market, and additionally, Alrosa has not made contract sales during October. The next sale will be mid-November as factories reopen.
ODC concluded their sale on 29th October. As had been expected, the overall result was slightly softer in the smalls area and cheaper ranges.
POLISHED
Round polished goods between 0.30–0.90cts have softened recently following significant increases in inventory. This contrasts with last month, where we reported a slight increase in prices.
In the US, the market is generally steady, with the current focus shifting towards Thanksgiving and the forthcoming holiday season. In India, with Diwali holidays approaching, polished production will cease for a few weeks. The depreciation of the Rupee has also impacted local trade in recent weeks. The Chinese market trading remains subdued and very selective. In Hong Kong, sentiment has improved in recent days with increased sales. However, the focus remains on +3cts high-colour/quality material for investment.
Despite all the challenges faced during the year, the industry expects global jewellery sales to still be in the region of $65 billion for the year. The challenge will be to maintain this figure in the face of ongoing competition for market share with synthetics.
Synthetic diamonds have seriously eroded the ‘mid-section’ of the diamond jewellery segment over the last decade. Some market commentators have floated the idea that the steady devaluation of synthetic diamonds to near worthless might inadvertently revive confidence and desire for natural diamonds. This could potentially position it back on the standing it previously enjoyed, as a true luxury product with both heritage and value.
An important step for the industry would be to see an end to retailers presenting natural diamond jewellery alongside synthetic. This practice will only conflate the two products and damage efforts to build demand for the natural product. However, while retail margins on synthetic stones remain higher than natural, this practice will likely continue.
TAGS TENDERS
In Dubai, 26th–30th October, we hosted another sale on behalf of ZCDC. Attendance was strong, with 60 companies securing appointments to view. Despite the slight softening in the general market, we are delighted to report a very strong result, exceeding reserve prices, with solid prices across all ranges. Sales were made to a good spread of customers, numbering close to 40. The entire production was sold.
Our recent tender in Johannesburg took place on the 27th October–2nd November. This event included goods from 8 new mine suppliers, as well as our regular mining partners. The event attracted around 100 buying companies from all of the major buying centres around the world. The event showcased 195 lots of high-quality original South African rough across a full range of sizes. We are pleased to announce that over 86% of goods were sold successfully. The event was one of the largest since our Johannesburg operation opened and continues to reflect the growing importance of TAGS SA as we further extend our presence and reputation in South Africa.
We concluded our 12th sale in Luanda, in association with Sodiam, during the week 30th September–8th October. The 53 lots presented of special stones resulted in a 97% sell-through, and all mines involved were extremely pleased with their results. We hope to conduct a final sale for the year in Angola in December.
We would like to take this opportunity to wish all our Indian customers and their families a very Happy Diwali, and look forward to welcoming you back for our next sale in November.
