JOHANNESBURG (miningweekly.com) – The diamond industry can expect a strong demand outlook in future; however, access to diamond financing – especially for traders, cutters, polishers and jewellery manufacturers – could hinder future market growth.

This is according to the fourth yearly global diamond industry report ‘Diamonds: Timeless Gems in a Changing World’, released on Tuesday by global management consulting firm Bain & Company and the Antwerp World Diamond Centre.

Last year, the market delivered growth between 2% and 4%. In 2019, the global market was expected to experience a widening gap between demand and supply of up to 5% to 6%.

This would be as a result of a decline in diamond supply and increased demand that was led by expanding wealth and a growing middle class in developed and developing countries.

However, looking to 2024, the industry should remain strong if it increases focus on driving demand and sustaining a positive image for the market. But, the report stated that macroeconomic uncertainties, as well as industry challenges, which included a decline in access to funding, could impact on future growth.

“The economic peaks and valleys that the global diamond market experienced over the last few years are steady, at least for the time being, but the industry cannot afford to get too comfortable. Macroeconomics, along with other factors – financing, marketing challenges, undisclosed synthetic diamonds, environmental concerns, social awareness, and even country-specific preferences – stand in the way of an easy, straight path to sustained diamond industry growth over the long term,” commented lead author of the global diamond industry report and Bain partner Olya Linde.

PRIMARY GROWTH
The US, China and India contributed most to the industry’s growth in 2013. The US led the world’s diamond retail market, while China and India remained at the top of the cutting and polishing and jewellery manufacturing sectors, respectively.

Bain & Company expected diamond consumption in the US to grow its current rebound trend of the past few years and eventually converge with its historical long-term growth rate in line with gross domestic product and disposable income growth, which were expected to grow between 2% and 3% over the next ten years.

Further, the report expected China’s diamond demand to double by 2024, adding that the growing middle class and rising urban population, as well as an increase in personal wealth in China, should help the diamond jewellery market sustain strong growth.

India’s revived economy and middle class, which was expected to grow 2.8 times by 2024, would produce high single-digit growth for the country’s diamond jewellery market, said Bain & Company.

The supply outlook for rough diamonds over the same period would develop in line with the planned reduction in global production levels. 

Bain & Company expected global supply to grow, on average, 3.5% and 4% between 2013 and 2019 and then decline by 1.5% and 2% through 2024, as a result of aging mines and a shift to underground mining. 

The report also estimated that supply would reach 163-million carats in 2019, which was below the preeconomic crisis production of 177-million carats in 2005, which dropped to 163-million carats in 2008.

It was also found that amidst a recently cautious and constrained environment owing to increased borrowing, the industry’s rising credit risk and tighter bank regulations, many traditional diamond banks had reduced their exposure to the industry.

In some cases, they were reducing the percentage of stones financed from 100% to about 70% to 75%. As a result, a period of deleveraging could strike, with available levels of financing plummeting by as much as $3-billion in the medium term.

“For all stakeholders to capture the opportunities created by the projected growth of the diamond market over the next decade, banks and diamantaires must change the way they do business. In the short to medium term, this includes increasing transparency of the reporting and inventory for the middle market segment, introducing new and more secure products, and enhancing cooperation between traditional commercial banks and diamond banks,” noted Linde.

Meanwhile, the report also highlighted key challenges that were important in defining the long-term outlook for the industry’s development. 

These included sustaining the emotional appeal and, therefore, the demand for diamonds; securing long-term access to diamonds – particularly for diamond jewellery players – as long-term supply tapered off and defining the role that synthetic diamonds should play in the industry.