Diamond Industry 2012 Review

The global diamond trade endured a 33% reduction in carat volume from 2006-2012, which triggered excessive diamond manufacturing and resulted in price instability. In spite of predictions by industry sources that the steep decline in carat supply would translate into a price increase, a downward trend in diamond prices commenced in fourth-quarter 2011 and went on to affect trade throughout 2012 as retail prices for polished 1-carat diamonds plunged 12.5% and 3-carat diamonds fell 11.6%. Taking into account that most diamonds on the market are less than 1-carat stones, polished diamond sales dropped from $22.6 billion to $20.7 billion while rough diamond sales declined from $18 billion to $15.5 billion.

Factors contributing to this slump included: devaluations of the euro, Indian rupee and Israeli shekel, which raised widespread uncertainty in diamond trading; slow economic growth in China, which had an adverse effect on consumer confidence and investment; and a pending tax increase in the United States, which reduced consumer spending on retail diamond jewelry during the December 2012 holiday season.

In spite of the stumbling blocks of 2012, forecasts for 2013 and beyond point to the emergence of vast markets in China and India, which currently have a joint share of 24% of the world diamond market. Industry sources say this figure is expected to increase to 30% by 2015, and by 2020 China and India will surpass the United States as world leaders in the diamond trade with a market share of over 40%.

Such calculations are offset by the lack of generic diamond promotion, the loss of market share in favor of other luxury spending, the influx of relatively cheap lab-grown diamonds (see article) and the recycling of diamonds from estates and collections back into the market, all of which affect demand for rough and fresh polished diamonds.

Be that as it may, market analysts predict that in 2013 rough supplies will be similar to 2012 levels at around $15.7 billion while the demand for polished stones will increase by 10% to $22.8 billion.