“The coronavirus pandemic has devastated the diamond world.” - Bloomberg
With all due respect to Bloomberg, there’s more to the story than the title suggests.
While the ROUGH markets are challenged, the POLISHED markets are relatively stable. Covid has driven rough diamond trading to a standstill. The world’s largest cutting and trading centers have been closed for prolonged periods. The Israeli bourse was closed for Covid, and the country is experiencing a spike in cases after reopening. Similarly, India was under complete lockdown for all of April and May. Russia, Botswana have also been under quarantine measures, and even the commercial flights required to transport diamonds have been limited. In short, diamond manufacturing was on hold during Covid; hence, the lack of demand for rough diamonds.
Moving forward, diamond cutters are trying to operate with fewer staff and social distancing. Despite best efforts, Covid cases are already emerging. This means diamond cutting will be limited, thereby reducing rough diamond demand. Similar challenges are being seen in US automobile manufacturing. To be clear, the reduced demand for rough diamonds is NOT related to (1) oversupply of polished nor (2) lack of polished demand; it is driven by reduced manufacturing.
At the time of writing, the polished market is stable. After reopening from Covid lockdowns, China and the Far East have shown an appetite for luxury goods, diamonds included. As America has re-emerged from lockdown, we have seen American demand return. The sales declines witnessed during Covid are more indicative of the lower rates of online jewelry sales and reliance on in-person interaction.
Looking ahead, declines in polished prices are HIGHLY unlikely, given the lack of new polished supply, reduced manufacturing capacity, and firm rough prices. We hope to see sustained jewelry demand buoyed by high stock prices and fiscal stimulus measures.