Impact of Declining Chinese Demand and Emergence of Synthetic Diamonds
"An Additional 15-20% Decline Expected Over the Next Year"
"Diamonds are forever." On the 4th (local time), US economic media CNBC reported that this slogan of De Beers, the world's largest diamond supplier, may no longer be valid. It diagnosed that the diamond industry is facing difficulties due to the continuous decline in demand in China and the growth of the substitute market.
According to the report, Anglo American, a British multinational mining company, announced last month that it plans to spin off or sell its subsidiary De Beers. Duncan Wanblad, CEO of Anglo American, also reaffirmed the intention to sell De Beers in a recent interview with major foreign media, saying, "(This sale decision) will be the most difficult part of the radical restructuring that De Beers must undertake."
CNBC analyzed that this sale decision is not unrelated to the sluggish diamond market. Paul Zimnisky, a diamond specialist analyst, said, "Despite the strong legacy left by De Beers during the Anglo American era, diamonds are no longer a suitable business," and explained, "The company ultimately seems to want to focus on a long-term perspective and a strategy for green infrastructure raw materials like copper, as shareholders desire."
Recently, the diamond market has entered a slump. According to the 'Zimnisky Diamond Rough Index,' diamond prices have fallen 5.7% so far this year. They have dropped more than 30% from the all-time high in 2022.
The cause of this slump is attributed to the decline in diamond demand in China, which was the world's second-largest diamond market for the past decade. Market research firm Daxue Consulting analyzed, "Along with the decline in China's marriage rate, gold and lab-grown gemstones have gained popularity, leading to a decrease in diamond demand." The end of COVID-19 lockdown measures in China also influenced consumers to increase spending on travel rather than purchasing diamond products.
The emergence of synthetic diamonds (lab-grown diamonds), which can be produced at costs up to 85% cheaper than natural diamonds, has also accelerated the price decline of natural diamonds. Ankur Daga, CEO of luxury jewelry retailer Angara, said, "The core issue is the rapid growth of synthetic diamonds," and predicted, "In the United States, the largest diamond consumer, about 50% of engagement ring stones will be lab-produced, and natural diamond prices will fall another 15-20% over the next year." According to data provided by analyst Zimnisky, sales of synthetic diamonds, which accounted for only 2% of the global diamond jewelry market in 2017, surged to 18.4% in 2023.
However, there is also optimism. Since large-scale marketing for diamond sales has not been conducted so far, it is explained that the market situation can be reversed through aggressive marketing. Recently, Signet Jewelers, the world's largest jewelry retailer, announced a marketing cooperation plan with De Beers to stimulate diamond demand. Signet expects sales contracts to increase by 25% over the next three years.
Anish Agarwal, co-founder of diamond consulting firm Gemdax, emphasized that "the diamond industry has not conducted large-scale marketing for nearly 20 years, and we are witnessing the consequences," but stressed the need for marketing that can revive Chinese consumer demand.
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