The divide in pricing between superior and lower-grade diamonds has notably widened within the lower clarities, driven by consumer preferences for high-quality stones and the accumulation of unsold inventory. Insights from manufacturers and exclusive data provided by Rapaport illuminate this trend.
With consumer sales exhibiting weakness, buyer demand has pivoted towards diamonds with fewer visible flaws. Consequently, an accumulation of less desirable diamonds has emerged, prompting dealers to emphasize the premium for the finest-looking slightly included (SI) diamonds. These SI diamonds, particularly those that appear inclusion-free to the unaided eye, have witnessed a growing price premium, sources have indicated.
The Gemological Institute of America (GIA) defines SI1 and SI2 diamonds as having inclusions noticeable to a skilled grader under 10-times magnification. These diamonds often hold appeal in the US market, offering a balance between budget considerations and visual appearance. Their aesthetics, however, vary significantly, even within the same clarity grade, influenced by the nature and size of the inclusions.
The prevailing decrease in discretionary spending among middle America’s consumers throughout the year has profoundly impacted the category. According to RapNet data, prices for 1-carat diamonds ranging from D to L color and IF to SI2 clarity dropped by 3.7% in July. This decline was steeper compared to the 1-carat RapNet Diamond Index (RAPI™), which tracks D to H, IF to VS2 diamonds and experienced a 2.7% slide for the same period.
About 18 months ago, a “decent” 1-carat diamond falling within one of the SI categories might have been subject to a 30% discount from the Rapaport Price List. In contrast, a “lower-quality” stone with the same clarity grade could fetch up to a 34% discount, as noted by an executive from a major Indian cutting firm. Presently, discounts have broadened to the range of 34% to 45% for similar merchandise, reflecting a value disparity of roughly 20%.
Another trader, based in Antwerp and choosing to remain anonymous, estimated the difference to be closer to 25%, a trend he reported witnessing for “three to four months.” Although the gap also extends to higher clarities, it is comparatively narrower.
Data from RapNet for July 2023 underscores this trend, revealing a wider distribution of discounts from the Rapaport Price List for 1-carat, H, SI2 diamonds compared to March 2022.
As market dynamics continue to evolve, the pricing divergence between varying diamond qualities underscores the nuanced preferences of consumers and industry responses to these shifting demands.
