De Beers, a major player in the diamond industry, has successfully finalised a 10-year sales agreement with the Botswana government. This landmark deal comes as a much-needed boost for the industry after a period of uncertainty marked by reported delays, disagreements, and threats of a potential breakup.
The new contract has raised questions about its impact on sightholders, as it grants a greater share of Botswana’s rough diamonds to the state-owned trader, Okavango Diamond Company. The implications of these new terms will be closely observed by industry stakeholders.
Market slowdown persists due to weak US retail demand
The diamond market faced ongoing challenges in June, primarily due to weak retail demand in the United States. As a result, the midstream sector came under significant pressure.
Jewellers responded by refraining from inventory purchases, opting to buy only for specific orders. Memo deals, where diamonds are borrowed for display and potential sale, gained preference.
To adapt to the lower sales and thinner profit margins, manufacturers continued to operate at reduced levels of polished diamond production.
Dealer activity slows amid falling prices and synthetic diamond impact
Falling prices and the growing prominence of synthetic diamonds have contributed to a slowdown in dealer activity. The natural diamond market, particularly for larger sizes and engagement rings, has been significantly affected by the presence of synthetic alternatives.
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While these trends were already noticeable in previous months, they intensified during June. The challenges posed by synthetic diamonds have further impacted the natural-diamond market, requiring industry players to navigate these changing dynamics.
Chinese diamond market faces sluggish growth
The Chinese diamond market experienced sluggish growth, primarily influenced by an economic slowdown and the depreciation of the yuan.
These factors have adversely affected demand in mainland China. Consequently, trading activity at the Jewellery & Gem Asia Hong Kong show remained muted as market participants faced a more subdued environment.
The sluggish performance of the Chinese market contributes to the broader slowdown observed in the diamond industry.
RapNet Diamond Index reflects declining diamond prices
The RapNet Diamond Index provides insights into diamond price movements. According to the index, diamond prices witnessed a decline across various sizes in June.
Specifically, the RAPI for 1-carat polished diamonds fell by 2.4% during the month. The overall trend shows a continuous decline since the beginning of the year, with the RAPI experiencing an 8.4% decrease year to date.
Year on year, the RAPI for better-quality 0.50- and 1-carat diamonds recorded a substantial decline of over 23%.
Polished inventory remains high despite low production
Despite reduced manufacturing levels, the supply of polished diamonds remains high but stable. Indian factories extended their May summer closures and continued to manage production volumes upon reopening.
However, the number of diamonds listed on RapNet decreased by 1.5% in June, resulting in a total of 1.75 million diamonds available on 01 July. Unfortunately, the drop in supply did not offset the decline in demand, underscoring the challenges faced by the diamond industry.