In 2023, the diamond industry experienced a massive plunge in sales following the surge in demand during the Covid-19 pandemic. Bloomberg reported that the world’s largest diamond companies took desperate measures to counteract the freefall in prices this year. Prices for wholesale polished diamonds have plummeted by approximately 20%, while uncut stones have seen an even steeper decline of around 35%.
Some of the industry’s biggest players, such as De Beers and Alrosa, have made unprecedented moves to stabilize prices. Last month, De Beers reportedly abolished the usual obligations for buyers to purchase all of their contracted diamonds at set prices and removed potential penalties. In a surprising turn of events, their expected sales totaling $500 million were reduced to a mere $80 million in the most recent trade. De Beers’ major rival, Alrosa, suspended all diamond sales for two months in September to prevent further price drops.
The diamond industry benefited greatly from the pandemic as sales of gemstones skyrocketed due to stay-at-home consumers turning to luxury purchases like jewelry. However, once economies began to open up, the demand for diamonds took a significant hit, leaving buyers with excess inventories. The declining demand was further exacerbated by challenges in key markets such as the US, which faced inflation, and China, which suffered a real estate crisis leading to a decline in consumer confidence.
While the situation seemed dire, the drastic measures taken by industry majors have already shown signs of success, with smaller tender sales and auctions witnessing price increases of up to 10% over the past week. However, the European Union’s plan to include a ban on rough diamond imports from Russia in its next round of sanctions has raised concerns. Belgium has expressed reservations, warning that Antwerp could lose significant business to Dubai if the ban on Russian diamonds is enforced, as it serves as a crucial gateway for 90% of the world’s precious stones.
The Russian Finance Ministry also cautioned against imposing sanctions on one of the world’s major diamond suppliers, citing the potential for “massive market distortions”. The situation remains under debate as the EU members deliberate on the ban and its potential impact on the industry.
The unfolding events in the diamond industry are a testimony to the turbulent impact of the pandemic on global trade and the delicate balance of supply and demand. A shift in consumer behavior, coupled with geopolitical tensions, has further exacerbated the challenges faced by diamond companies. The future trajectory of the industry will depend on how effectively companies adapt to changing market dynamics and navigate the complexities of international trade. For more stories on economy and finance, visit RT’s business section.
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