As the year draws to a close, we at Mercury Diamond stopped to take a look at the state of polished diamond prices over the past year. We noticed that prices have been lingering for some time and decided to look at what some of the other diamond indexes in the market show. No surprise here, we all show pretty much the same scenario.
Consider the following graph of three diamond indexes: RAPI 1 Carat by Rapaport, IDX Diamond Index and Mercury Diamond’s Mercury Diamond Global Tracker™ (MDGT™). The three track diamond prices and generally moved in the same direction over the years. We see some variations between them, but the variations are due to differences in methodology and what is being tracked. However, they differ mainly on a micro level.
On a macro level, the general trends are virtually identical: prices rose until mid-2011, dropped sharply and then moderated through mid-2012, before falling again and then climbing slightly until late 2015. From that point, we saw an ongoing, yet mild downward slope that continues to date, three years later. Three years of weakening prices, three years with no relief in sight.
Despite all the small increases, polished diamonds have been really sliding since August 2011. Some may argue that the runaway prices in late 2010 and the first half of 2011 were just a bubble, not a true reflection of polished diamond prices, which is why they tumbled right afterwards. Fair enough. Yet still, and given that some price increases took place here and there, we are looking at an ongoing price decline since mid-2014. Three and a half years of price declines.
If you are a a polished diamond trader or a manufacturer, you are probably asking yourself when this will end. We ask ourselves the same question, with a considerable amount of concern.
Without a revival in polished diamond prices, the viability of a diamond-related financial tool is limited. After all, who wants to invest in something that only declines? With diamond prices that continue to decline, the perception of diamonds and their positioning in the eyes of consumers will erode as well.
Declining polished diamond prices pull down the prices of rough diamonds, but with the cost of production acting independently (read: remaining at least steady, if not rising), the economic viability of many diamond mines may diminish, leading to a cut in production and availability. That could be a good thing, as it wil lead to shortages, but without consumer interest, will it lead to rising polished diamond prices? That is doubtful.
Sadly, the ongoing price decline accuretly reflects the state of affairs of the entire diamond industry: financing banks are fleeing, the number of people in the industry is decreasing, innovation is limited, new and exciting ways to connect to consumers are not really there, marketing spending is limited at best, the number of companies in the midstream and in retailing is shrinking, and consumers are looking at alternatives – from the enduring handbags to lab-grown goods. No wonder prices are on a constant downward slide.
We are ending a misrable year. A year of rising interest in lab-grown, a year of banckruptcies and closures, a year without meanigful generic marketing, a year without differentiation in jewelry design, a year without important changes in the Kimberley Process, a year of digging in with the same old way of thinking, a year where we did not adopt new management tools such as use of high-quality data analytics, a year of lost opportunities.
So as the year ends, I’m reminded of the encient Jewish blessing said every year at the start of a new Jewish year: May the year and its curses come to an end. May the New Year with its blessings begin. We are coming to the end of a year that was wasted. May the New Year bring with it a renewed effort to move forward with innovation, a hunger for improving all measures, a year of growing consumer interest. If we succeed there, rising diamond prices are sure to follow.
I wish you all a happy holiday and a prosperous New Year.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a Professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.