Business Standard: December, 2015
New Delhi: China and India were the bright spots for global diamond industry in a turbulent 2015, amidst flat global retail sales, plunging revenue of diamond producers, and margin pressure faced by diamond polishers.
According to The Global Diamond Industry 2015: Growth perspectives amid short-term challenge, an annual report by Bain & Company, and Antwerp World Diamond Centre, the global diamond industry is expected to recover its mojo within the next two years, riding on growing demand for diamond jewellery from United States, China and India. "The long-term outlook for the diamond market remains positive, with demand expected to outpace supply starting in 2019," the report said.
Olya Linde, lead author of the global diamond industry report and a Bain partner, noted that during the economic turmoil of 2001 and 2009 prices took 18 to 24 months to recover. "This time the market has the potential to recover within just one to two years," she added.
Analysing the current turbulence in the industry the report said the mild decline in consumer demand for diamond jewellery began in 2014 in Greater China. This led to a notable drop in demand for polished and rough diamonds in 2015. This forced retailers to trim orders for polished diamonds, creating an inventory backlog in the cutting and polishing segment, the report said. "As a result, prices for polished and rough diamonds plunged 12 per cent and 23 per cent, respectively, since May 2014 and 8 per cent and 15 per cent, respectively, for the first nine months of 2015," the report noted.
Global retail sales of diamond jewellery grew in 2014 and in the first half of 2015 by four to eight per cent, with the US as the main growth engine. Retail sales in China grew six per cent in 2014, coupled with strong growth in diamond jewellery sales in India, the report said. However, the existing state of turbulence in the industry would continue in 2015 with diamond producers and mid-segment companies expected to experience a 10-20 per cent decrease in revenue with near flat diamond jewellery sales, the report added.
The report said that demand in Chinese market is likely stay flat in 2016 before an anticipated recovery in 2017. This is expected to lead to 4-5.5 per cent annual growth in demand through 2030. The report forecasts that demand for rough-diamond demand will grow at an annual rate of about three to four per cent over the next 15 years.
GETTING ITS MOJO BACK