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As retailers and suppliers alike bid farewell to a tumultuous and unpredictable 2022, diamond industry analysts outline their thoughts about the road ahead and how the retail market in 2023 will be affected.
As part of a report titled Setting expectations amid market uncertainty the likelihood of the market following similar patterns seen in the past year was emphasised by Rapaport News senior analyst Avi Krawitz.
“It may be a time for new beginnings but sentiment in the diamond market remains the same – somewhat cautious,” Krawitz said.
“That is because diamond trading is slow partly due to the seasonal lull, but also given the general market uncertainty.”
He continued: “Polished market prices continue to decline. Overall the midstream ended the year with high inventory and manufacturers continue to reduce prices to offload less-popular goods and raise liquidity. They’re maintaining low polished production following the drop in rough buying during the fourth quarter.”
Krawitz also noted the importance of sales performance within China, where COVID-19 restrictions have been lifted by officials, however; consumers remain hesitant to resume spending.
Quarantine measures remain in place for tourists meaning that sales in travel destinations such as Hong Kong and Macau remain unlikely to enjoy spikes in spending.
“The main takeaway is that it is not easy to predict the direction in which the market will develop,” he said.
“Remember that trade tends to improve at the beginning of the year, stimulated by jewellers replenishing inventory sold during the holiday season and that should have a ripple effect on the rest of the trade.”
Price of rough dipping
Diamond industry analyst Edahn Golan recently suggested that rough diamond prices are falling due to lower demand for polished diamonds.
According to Golan, who is the owner of Edahn Golan Diamond Research and Data, the largest challenge faced by the diamond industry will be improving consumer interest in the bridal category.
“Currently the rough diamond market is going through its typical cyclical slowdown. Manufacturers are selective in their buying,” Golan told Rough & Polished.
“As usual around this time of the year, manufacturers are mainly focusing on fulfilling demands coming in from the consumer centres where jewellery sales are reaching their annual peak. Once the holiday seasons end, manufacturers will assess consumer demand and decide how to proceed.”
Golan said that a combination of consumer demand, rough availability, and the value of currency would determine the health of the market.
“In 2021, prices and demands were exceptionally high, something that stretched into 2022. Then a decline hit the consumer market in the second half of 2022. The level of demand in December will dictate prices in the first couple of months of 2023,” he said.
“Considering this, and current market trends as we see at retailers across the market, it will be fair to expect a decline in polished diamond prices, especially if rough diamond prices will continue softening.”
Sales rising, prices… dropping?
The rise of lab-created diamonds remains a hot topic within the wider jewellery industry and according to analyst Paul Zimnisky, prices continue to drop despite a sustained rise in sales.
The US-based analyst reported lab-created diamond jewellery demand increased by an estimated 38 per cent in 2022 on a year-by-year comparison, reaching $US12 billion. At the same time, prices fell by approximately 20 per cent.
Zimnisky said that this trend is likely to continue in 2023.
“Going into 2023, the swift momentum of lab-diamond demand growth continues, however, so does a trend of softer prices,” he said.
“In 2022, more and more retailers, especially in the US, inventoried [stocked] the product, which has led to much wider-scale downstream distribution of lab-grown diamond jewelry. Notably, US major Signet Jewelers and global fashion jewllery powerhouse Pandora led the charge.”
As part of his report, titled Lab-diamond sales grow as prices fall, Zimnisky highlighted the significance of lab-created diamonds reaching 10 per cent of total global diamond jewellery sales for the first time.
“It is important to remember that lab-created diamonds are creating incremental demand for diamond jewellery that would otherwise not exist — especially at the lower-price points. Looking longer-term, this incremental demand will likely continue to grow while the share of lab-diamonds directly cannibalising natural diamond sales will stabilise and level off,” he said.
“Product marketing by both natural and lab-diamond producers as well as product positioning by retailers at the jewellery counter will ultimately determine the level of segregation of the two products and the speed at which the bifurcation plays out.”
While a rise in demand contrasted with falling prices may seem counterintuitive, Zimnisky explained this phenomenon by highlighting lab-created diamonds status as a manufactured product based on evolving technology.
That is, pricing is impacted by not only rising demand but an even faster increasing supply – and this supply is increasingly accomplished with improved efficiency.
This is a crucial contrast to the ‘natural’ diamond industry which is based around the sourcing of non-renewable natural minerals and metals.
More reading
Understanding Uncertainty
Weakened demand impacts De Beers sales
US retail giant raises full-year guidance
De Beers extends sightholder contracts
Sales rise for Pandora in Q3, forecast remains positive
Blue Nile changes stance on lab-created diamond engagement rings
Lightbox exploring bricks-and-mortar options
Lab-created diamond sales reaching new heights in US
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