Once considered the jewel of jewels, diamonds face an unprecedented inventory buildup due to declining demand. This is attributed to reduced marriages in China, the world’s second-largest diamond market, and the increasing preference among consumers for lab-grown diamonds (lab diamonds).
On Tuesday, the Financial Times (FT) reported that De Beers, the world’s largest diamond company, has accumulated diamond inventories worth $2 billion this year, marking the highest level since the 2008 financial crisis.
De Beers CEO Al Cook admitted that this year has been a challenging one for rough diamond sales.
Demand for diamonds has steadily declined since the COVID-19 pandemic. De Beers reduced its rough diamond production by approximately 20% compared to last year and lowered wholesale prices for intermediaries at this month’s auction.
De Beers, famous for the slogan “A diamond is forever,” was established in the late 19th century and now employs around 20,000 people. It maintains a dominant position in the diamond market, estimated at $80 billion; however, De Beers’ revenue fell from $2.8 billion in the first half of last year to $2.2 billion in the same period this year.
Competitor Alrosa, based in Russia, has also been hard hit. In 2022, following Russia’s invasion of Ukraine, the G7 imposed sanctions on Russian diamonds, further impacting Alrosa’s business.
The declining demand for diamonds is significantly linked to reduced marriages in China.
Due to demographic changes and employment difficulties, the number of marriages in China has decreased sharply, resulting in a steep drop in demand for diamonds commonly used in engagement rings.
China’s annual marriage registrations peaked at 13.46 million in 2013 but have declined for nine consecutive years, reaching 6.83 million in 2022, falling below 7 million couples.
In response, Chinese jewelers are increasing diamond exports to reduce their inventories.
Additionally, competition from lab-created diamonds, which cost just one-twentieth of the price of natural diamonds, is intensifying.
In the United States, the world’s largest diamond market, lab-grown diamonds account for about half of industry sales, and lab-grown diamonds are especially popular, which has affected traditional diamond companies.
De Beers launched a natural diamond marketing campaign in October to boost sales, reminiscent of its iconic mid-20th-century advertisements. The company also plans to expand its global store count from 40 to 100 locations.
Cook noted that recent credit card data from the U.S. showed increased purchases of jewelry and watches, suggesting potential signs of recovery in global markets, including the United States.
De Beers has been seeking separation from its parent company, Anglo American.
However, Anglo American CEO Duncan Wanblad warned that the current weakness in the diamond market could complicate efforts to divest or conduct an initial public offering (IPO) for De Beers.
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