1) Diamond industry’s miseries are far from over
Demand for diamonds have decreased and stagnated, especially with a slump in China, and has amplified the problems of the industry. Players across the diamond pipeline are facing severe challenges. Cost of mining rose significantly as mines go deeper and underground. Major diamond miners are also recording negative results.
Profit margins of diamond manufacturers have almost vanished and their profit share fell by 100% from last year. In past four months, more than 2,000 diamond processing units in India have shut shop, while many are declaring bankruptcy and defaulting. Half of India’s diamond processing sector faces extinction, with 50% of the existing 700,000 cutting & polishing workforce face threat of job losses.
Diamond industry is expected to remain distressed, sales to remain weak and diamond traders and manufacturers to struggle.
2) Mining companies acted against industry’s best interests
Rapaport’s report “Rough Bubble Bust” details how rough diamond bubble created by diamond miners including De Beers and some unscrupulous traders is busting and in turn affecting the entire diamond industry. While De Beers increased prices of rough diamonds over the years, prices of polished diamonds did not increase proportionately, creating a huge gap. The ponzi scheme made by De Beers has not only forced many midstream players out of business but also affecting De Beers itself, with its 2015 H2 sales expected to plummet by over 60%.
Earlier this year, De Beers’ CEO Philippe Mellier made the following comment in an interview “I have a business. I am not a banker. I am not a supporter of customers. This is not sound, to support a customer base.”
Additionally, diamond miners and jewelers are tying up directly and the entire diamond middle-market intermediaries are getting bypassed. By acquiring mid-stream capabilities in-house and vertically integrating the industry, a new business model is emerging, where mid-market players that employ tens of thousands of people globally are running for shelter.
3) Supplies are depleting and Lab-grown diamonds seem to make up for the deficit
30 major diamond mines will reach End of Life by 2030 and expert analysis predict falling rough supply by more than 50% by then. Some major mines have less than 10 years of life left, while no new viable mines have been discovered in the past 2 decades and exploration budgets of miners have also reduced by over 50% since 2007 levels. This may result in a 278 million carats Demand-Supply gap by 2050, according to Frost & Sullivan.
As mined diamond production declines, the only sustainable source to fill the projected deficit are Lab-grown diamonds. Though the current estimated production of Lab-grown diamonds globally is only around 360,000 carats, by 2018 it is expected to reach 2 million carats. Besides, a new research report predicts annual production of Lab-grown diamonds to cross 20 million carats by 2030, which will help in addressing 13% of the demand-supply gap.
4) Mining companies continued with their efforts to destroy Lab-grown diamond market
Considering Lab-grown diamonds as a threat, diamond miners and vested interests in the industry have been on a mission to destroy Lab-grown diamond sector. Though diamond mixing stories surfaced during the year, India’s two leading diamond associations – GJEPC and SDA, categorically denied them as only rumors. Additionally, ample and affordable diamond detection machines are available and widely used to check any cases of undisclosed Lab-grown diamonds.
Inline with this, Diamond Producers Association (DPA) comprising the world’s largest diamond miners was formed earlier this year. The association was started with its first agenda to “counter the threat of expansion of lab-grown diamonds” as reported by The Wall Street Journal.
Additionally, mined diamond producers successfully blindsided organizations like ISO, which released a new standard ISO 18323:2015 defining incorrect nomenclatures and terminologies for Lab-grown diamonds. Our exclusive qualitative survey of 19 players in the Lab-grown diamond industry strongly reveals that ISO 18323 is not just incorrect but also biased towards mined diamond players.
5) While Lab-grown diamonds met with more acceptance and more success
Meanwhile, Lab-grown diamond sector is meeting with more acceptance among consumers and retailers alike. More jewelry retailers are now selling Lab-grown diamonds. Scio Diamond Technology – a major Lab-grown diamond producer, is now selling its diamonds at US’s 4th largest jewelry retailer – Helzberg Diamonds.
Though smaller size of Lab-grown diamonds was a challenge earlier, New Diamond Technology LLC crossed the 10 carat milestone by growing a 10.02 carat Type IIa VS1 IGI-certified diamond, beating the previous record of 3.04 carats set by Pure Grown Diamonds.
IIa Technologies inaugurated the world’s largest diamond greenhouse – a 200,000 Sq. Ft. Lab-grown diamond growing facility in Singapore and also established a Center of Excellence (CoE) – a diamond research center to generate and disseminate scientific knowledge and information.
Seeing the promising future of Lab-grown diamonds, Hollywood actor Leonardo DiCaprio along with 10 Silicon Valley billionaires invested in a California based Lab-grown diamond startup – Diamond Foundry.
With demand expected to rise by 25-30% YoY, Lab-grown diamonds are getting more acceptance and more success.
6) Technology improvement created more applications for diamonds
New developments were observed in diamond application including Cancer detection and treatment, Quantum computing, High power laser systems, and acceleration of Solar Energy through a new material – Silicon Carbide (SiC), a combination of diamonds and silicon.
Scientists developed a new carbon material called ‘Q-carbon’ that is harder and brighter than even diamonds and whose properties make it very useful for various applications including medical and electronics. Besides, diamonds are now being used to power the Bowers & Wilkins speakers used in BMW 7 Series stereo system.
7) Jewelry retail is undergoing metamorphosis
Online jewelry market is picking steam from booming E-commerce leading to the Online Jewelry Sales Rush. VelvetCase, an India-based online fine jewelry marketplace recently executed an order for bridal jewelry of USD 200,000+. However, at the same time, a reverse disruption of online jewelry business is happening, where online players like Blue Nile are opening physical brick-and-mortar stores. Experts suggest that the future of retail will be omnichannel and jewelry retail may adopt hybrid models in the future.
8) Modern Jewelry design spawn new trends
New trends of modern Jewelry design are modular, utilitarian and minimalistic. Cultural shifts and globalization has led to cross pollination of elements of jewelry design in true sense resulting in constant evolution and emergence with changing trends of jewelry industry. Though the royal jewelry of the world is stately, majestic & magical, new age jewelry includes ferrofluid jewelry and fluorescent diamonds.
9) Environmental and ethical issues persisted
In Zimbabwe’s Marange region several complaints were filed by local communities against diamond miners who pollute the regions’ rivers and other water sources. Brazil’s Amazon rainforest is also being affected by diamond mining. Indigenous communities in Brazil’s natural forests have been reduced to sheer 1,758. Brazil’s state prosecutor said “The Cinta-Larga people are on the brink of genocide, if not physically, then at least ethnically and culturally.”
Owing to environmental issues, De Beers was forced to close down its Snap Lake diamond mine. On the other hand, Pure Grown Diamonds – a leading player in Lab-grown diamonds, won the 2015 Eco-Excellence Award in the Most Socially Responsible category.
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