The diamond sector has weathered a turbulent period since the first quarter of 2022 when rough prices soared to record highs. However, last year witnessed a significant downturn, with rough prices plummeting by 15-20%, as indicated by the Zimnisky Global Rough Diamond Price Index. Presently, prices stand approximately 25% lower than their peak in early 2022.
Several factors contributed to this downward trend. The pandemic-induced years brought unprecedented volatility to diamond supply, with production hitting its lowest levels since the 1990s in 2020. While a recovery ensued from 2021 through 2023, output remains notably below pre-pandemic levels by some 15-30 million carats.
The volatility extended to diamond demand over the past four years, influencing both rough and polished prices. Notably, the industry experienced a “bullwhip effect” in the previous year as producers and traders rushed to replenish depleted stock following robust demand in 2021 and early 2022. However, the flood of new goods resulted in stringent curtailing of purchases by midstream buyers toward the end of 2023.
This market dynamic led to significant declines in sales for major players like De Beers, with a consequent buildup of unsold stock. Smaller, independent producers felt the impact more acutely, as evidenced by instances such as Canada’s Stornoway Diamonds filing for bankruptcy for the second time and South Africa’s Petra Diamonds deferring capital projects.
The emergence of lab-made diamonds has further influenced the sector, although their impact remains limited outside the United States.
Looking ahead to 2024, miners are expected to release excess stock into the market in response to any signs of demand recovery. However, by the latter half of the year, the market’s medium and longer-term supply dynamic may become more apparent.
An additional factor to consider is the impact of wider Western sanctions on Russian diamonds, which come into full force this year. While the immediate effects may not be severe, the risk of further supply disruptions remains a possibility.
Commercial production at Angola’s Luele mine is set to ramp up, offering a new source of supply as aging mines worldwide are depleted.
A moderate recovery in both rough and polished prices is anticipated for 2024, with potential gains from seasonal restocking early in the year. However, the sustainability of price increases will depend on factors such as global macroeconomic conditions and demand dynamics, particularly from key markets like China.
