The world diamond trade had spent years in the doldrums, only to be crushed by the pandemic when they began to look up. Now, finally, business is booming again.
Factories in the industry’s “engine room” in Surat are so big at stimulating production that the most skilled cutters and polishers are hunting heads with offers of 50 percent paid walk and benefits such as free food and housing. Miner De Beers is poised for its biggest rough diamond sale in three years, even after raising prices, and rival Alrosa said last week that they planned to continue for a time.
The success is driven by holiday jewelry sales, especially in the critical U.S. and Chinese markets. For years, diamond competitions increasingly flourished from travel as a form of luxury consumption. Now, with holidays being withheld due to locks and other restrictions, consumers are putting their disposable income into online purchases.
“Not only have people learned to work remotely, but also shop online, including diamonds,” Evgeny Agureev, head of sales at Alrosa, said in an interview. “Money used to be spent on trips or dinners at expensive restaurants, but now part of this demand has gone to diamonds. Online sales last year accounted for almost 20 percent of the total. ”
The increase in sales is driven by strong demand for polished diamonds, at a time when stocks held by factories and traders had declined sharply after the original Covid-19 locks.
However, for a business familiar with dramatic boutiques, it is unclear whether the recapture will take hold, or represent just temporary relief. Some industry partners are worried that the market is running too hot, putting risk down later in the year.
Annual diamond jewelry demand had been stagnant at $ 80 billion since five years, and the region’s middle ages were struggling to turn a profit. As global vaccines roll out and other luxury purchases come to life again, there is a risk that the industry will face the same old challenges of the past.
For now, money is pouring in. Signet Jewelers reported a 7.8 percent jump in holiday sales in North America, the largest market in the industry. The online sale of the jeweler was up in that period. A similar story was in China, the second largest market, where Chow Tai Fook reported an 18 percent increase in quarterly sales.
India, where nearly 90 percent of diamonds are cut or polished, generated nearly $ 2 billion in rough diamonds last month while loading -cutting and polishers racing to meet additional demand and relocation investments.
De Beers and Alrosa have both responded by raising prices, trying to reclaim some of the land they lost last year when demand fell.
Even as De Beers implemented an increase of about 5 percent in its first sale of the year last week, buyers are still buying. The sale has not yet been finalized, but the miner is on course for the biggest rough diamond auction in three years – at around $ 600 million – according to people familiar with the situation.
However, the first sales season of the year is traditionally the busiest, when the middle men of the industry are tearing to shreds. If sales slow down later in the year, prices could come under pressure again.
The risks of a short-term recovery are exacerbated by the billions of dollars of rough diamond stocks held by the two major miners. So far, they have resisted the temptation to download deposits.
“There is a legacy for miners. If they choose not to sell, they will lose out on money stocks, but if they sell too much, there is a risk that they will overtake the market, ”said Anish Aggarwal, com- partner at specialist diamond consulting firm Gemdax. “If they get these right, there will be price support.”
At the moment, the middle men – who cut, illuminate and trade the world’s diamonds – are making money.
In the so – called secondary market – where buyers are selling to gem manufacturers that do not have direct access to De Beers or Alrosa – boxes have been changing hands at prices above 5 percent, and some in double digits, even after price increases. That suggests that manufacturers believe they can make a profit at current prices.
Rough diamond prices have generally recovered to pre-pandemic levels, while polished prices are slightly higher. That’s good news for small and private businesses that cut, polish and trade the stones.