Diamond prices are expected to rise as global demand almost doubles this decade, according to Bain & Company’s latest report.
Commissioned by the Antwerp World Diamond Centre, the consultancy’s 2011 Global Diamond Industry Report argues that diamond demand (in carats) will grow more than six percent per year through to 2020 far outpacing the 2.8 percent annual supply.
The report said a doubling in the ranks of the Chinese and Indian middle classes by 2020 will drive much of the demand surge, with their combined market share projected to reach 30 percent by the end of the decade.
Bain partner Gerhard Prinsloo said even the most conservative growth scenario in the report forecasts a strong positive outlook for the US$60 billion diamond jewellery industry.
Other report findings include:
- By 2020, annual production will swell to nearly 175 million carats and surpass peak 2007 pre-crisis production levels. Thirteen new mines from previous discoveries may add up to 23 million carats by the end of the decade, although no new discoveries are expected in the foreseeable future
- A growing scarcity of high quality larger-carat polished diamonds (ie. those above two carats) points to disproportional increases in revenues in this segment. This segment typically represents five percent of diamond production terms of volume, but 50 percent of the sales value for producers
- Given an even more pronounced structural shortage for larger diamonds, retail chains will need to seriously reconsider their diamond sourcing strategy in the coming years.
- Family-owned diamond retailers, many of them fourth and fifth generation businesses, will continue to be hard hit, as specialised retailing chains continue to take market share.
“This report unveils much of the mystery surrounding the diamond industry,” said Ari Epstein, CEO of the AWDC.
“It paints a positive outlook and underscores the value of our continuing commitment to improved transparency.”
Nonetheless despite the predicted shortfall in world diamond supplies Bain & Co concludes that investment in diamonds is unlikely to become “significant for demand”.
“Even though diamonds may seem like an attractive investment, much like gold or silver, the difficulties with valuation, the absence of a spot market and the lack of liquidity make them largely unsuitable.”