As we enter the 2020’s, Antonio Cecere, President of Geneva Diamond Exchange and Founder of Monaco Diamond Exchange, explains the diamond industry of the past decade and what expectations look like for the 10 years ahead.
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Monaco Life: Ethical sourcing underwent great scrutiny in the recent past. How much does consumer confidence affect the jewellery sector in regards to synthetic and conflict diamonds?
Antonio Cecere: According to a recent poll by Rapaport, consumers lately have grown more concerned to the extent that they are willing to pay more for diamonds that are proven to be natural and ethically sourced. As a result, the Diamond Standards Organisation (DSO) filled the gap between polished diamonds and the Kimberley Process (KPCS), the rough diamond compliance scheme, by implementing a certification system for polished diamonds designed to inform and reassure consumers on the conformity of their purchases.
What were last decade’s expectations and have they been met by the market?
The expectations started very high with China driving demand for the first 18 months and the prices of polished diamonds soaring rapidly. After an excellent start, the market slowed down after 2011 and the prices stagnated until the end of the decade. This is due to macroeconomics and the general state of the economy across jurisdictions; more recently the trade war between US and China also impacted the trade. Overall, the jewellery demand from 2010 to 2018 increased by 16% according to De Beers.
What were the reasons for setting high the expectations and what were the major causes for the slowdown?
China and India were rapidly growing new-markets and their overall size commanded high projections in terms of volumetric consumption. In addition, the knowledge that there will be a widening gap between diamond supply and demand in the following decade also created excitement around this asset class. However, the financial crisis that started in 2008 eventually caught up with the diamond market because consumers’ purchasing power came to suffer and the diminishing bank credit affected cutters and polishers alike.
Is this performance analysis valid for all types of diamonds?
We tend to generalise, but no, this is not valid for all diamonds. Smaller diamonds, less than one carat, are the ones that most suffered whilst on the opposite side of the spectrum fancy colour diamonds had a rather positive 10-year performance across all colours. Typically, pinks and blues outperformed yellows which are slightly more common; reds and greens remained the most sought after although the price tag reflects their rarity.
What can we expect in the next decade?
The world of diamonds has technologically evolved in the last couple of years and so have the purchasing patterns. On-line sales have grown exponentially in the last decade redesigning the supply chain order and, after a reassessment period, diamond prices will continue their historical growth. Quite indicative of this transformation are the results of auction houses that had a decade of jewellery record sales supported by on-line bidders. Sotheby’s, for instance, achieved its biggest 10 jewellery sales ever in the last decade, selling almost 700 items valued at over a million US dollars and 41 items at over 10 million US dollars. Undoubtedly, this trend will continue in the new decade.
What will be the catalysers to the diamonds’ performance in the next decade?
In regards to the ethical concerns, Diamond Standards Organisation is set to reassure consumers on the validity of their purchases therefore re-establishing confidence and connecting Kimberley Process to polished diamonds. Lab-grown diamonds production will be led by De Beers and Swarovski who have the magnitude and the ability to guide the market, set the prices and add transparency to the process. Surely, the closure of important mines like Argyle in 2021 followed by Ekati and Diavik is going to impact the market and limit the global yearly output which will result in the current stockpile to be fully absorbed. Concurrently, the consolidation of the mining sector due to taxation and extraction costs will further benefit overall pricing. Finally, technology will better support the diamond sector both with blockchain innovation and with alternative financing methods like tokenization.
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