Friday, July 12, 2024

“Diamond Market Sees Dwindling Shine in U.S. and China, Pushing Prices to a 14-Year Low”

Amid economic uncertainty in two major markets, the United States and China, the natural diamond industry is experiencing a significant downturn in prices. Factors contributing to this decline include wavering economic conditions and the rising popularity of more affordable synthetic stones.

Reports show that the price of a polished F color, VS1 clarity diamond—a global benchmark—has plummeted to approximately $9,200 per carat in mid-December. This marks the lowest point since 2009, reflecting a sharp 24% drop from its recent peak in August 2022.

Key players in the diamond mining industry, such as De Beers under Anglo American ownership, typically send raw stones to polishing facilities in India and various other locations. Following this, trading companies purchase the processed gems.

De Beers responded to market pressures by reducing prices for rough diamonds by approximately 5% to 15% in July. In the U.S., luxury goods sales have taken a hit due to escalating interest rates and persistent inflation, prompting consumers to tighten spending. Similarly, a real estate downturn in China has negatively impacted diamond demand in that market.

Reflecting the growing preference for synthetic diamonds, these alternatives are posing a challenge to the demand for natural stones. Synthetic diamonds, nearly indistinguishable from their natural counterparts in crystal structure and composition, come with a significantly lower price tag.

Nobuyuki Harada, head of Tokyo-based Jewelry Advisor and Gallery, highlighted this trend, stating, “You can buy a synthetic diamond for a tenth of the price of a natural diamond in the U.S., and that could drop further in the future. Young Americans and other price-conscious buyers tend to choose synthetic diamonds.”

A reported one-third of U.S. couples who purchased engagement rings with center stones in 2022 opted for lab-grown diamonds, as noted by The Wall Street Journal. Factors like their comparatively eco-friendly production methods have resonated with consumers who prioritize ethical considerations.

In response to the declining demand for natural diamonds, efforts are underway to reduce inventories. Notably, India’s diamond industry, a significant global polishing hub, halted the import of rough stones for a two-month period until mid-December.

While wholesale diamond prices have decreased in dollar terms, retail prices in Japan have remained high during the Christmas shopping season. Sellers have gradually raised prices since around 2021 due to a weak yen and elevated commodity costs, impacting the prices they pay for their inventory.

In the geopolitical sphere, European countries and Japan are poised to ban imports of Russian diamonds in January, aligning with a similar move by the U.S. This action aims to widen the sanctions imposed in response to Russia’s invasion of Ukraine. Despite this, market experts anticipate a limited impact on supply and demand since many luxury brands have voluntarily ceased trading in Russian diamonds, minimizing their influence on the market.

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