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Diamond will sparkle again only from next year

Growing high and middle classes in China and India will help the global diamond industry recover to pre-pandemic levels between 2022 and 2024

The diamond demand recovery will diverge depending on lockdown policies, government support, and the extent to which retailers manage to shift sales online, says a Bain report. (UnSplash)

Diamond jewellery demand will recover to pre-pandemic levels between 2022 and 2024, with China leading the way, a report commissioned by the Antwerp World Diamond Centre has predicted.

Demand recovery will diverge depending on lockdown policies, government support, and the extent to which retailers manage to shift sales online, said the report by consulting group Bain.

The diamond industry was already under stress before 2020, but although the covid-19 pandemic exacerbated this, the report said it is well placed to recover.

"We strongly believe that the industry is in very good shape for a strong rebound," Olya Linde, a partner at Bain, said.

China's diamond jewellery demand will recover fully this year, while in India it will only recover by end-2023 or 2024, with the US expected to recover by 2022-2023.

Bain forecasts that rough diamond production will remain stable from 2023 to 2030, with very few new mine projects coming online, helping the recovery. Growing high and middle classes in China and India will drive the global industry.

Diamond production fell 20% in 2020, the report estimated, and rough diamond sales, which had already fallen 18% year-on-year in 2019, plunged 33% in 2020 as diamond miners faced with plummeting demand sought to shore prices up by limiting supply.

Mining companies bore the brunt of the downturn, with profit margins falling by 22 percentage points, Bain found.

But while the pandemic hit the diamond jewellery market hard, with sales dropping 15% from 2019, it performed better than personal luxury (watches, apparel and accessories), which saw sales fall 22% year-on-year.

Threats to the market's recovery include a double-dip recession and competition from other luxuries, the report said.

Meanwhile, the demand for gold in India, world’s second-biggest user, will rebound this year after collapsing in 2020 as the rollout of vaccines pushes life back closer to normal, according to the World Gold Council (WGC).

Some of the weddings and festive buying that had been postponed because of the pandemic will come back in 2021, and this pent-up demand will boost sales, P.R. Somasundaram, managing director for India at the London-based council, said in an interview to Bloomberg TV.

“In 2021, you will see a big spurt in demand,” barring any unforeseen factors, Somasundaram said. Historical data show that after plunging in 2009 following the financial crisis, Indian demand jumped back up in the next three years, he said.

Even before the pandemic hit, demand in India had been losing ground as transparency measures taken by the government changed buying behavior. Still, gold’s allure remains strong as Indians have a cultural affinity for the metal and prefer it for weddings, Somasundaram said, adding that rules out bitcoin as a big threat in the country.

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