With natural diamond prices holding their ground against lab-grown alternatives, De Beers is optimistic about a market recovery in 2024 following the shocker that was 2023.
“We see 2024 as a year of recovery,” De Beers’ chief executive Al Cook told Bloomberg TV. “We expect that upturn in diamond demand to be gradual rather than sudden.”
He agreed that 2023 “was a very challenging year for the diamond industry”.
Lower demand was driven by a combination of a fall in economic growth, a lag in “engagement rates” in the US and China, and encroachment into the sector by lab-grown diamonds.
Cook sees less competition from lab-grown diamonds in 2024 though, given their prices have fallen by more than 90% in just two years.
“Customers clearly see now that natural diamonds and lab-grown diamonds are two entirely different things,” he commented.
According to StoneAlgo’s lab-grown diamond price tracker, the average price of a one-carat lab-grown diamond fell over 37% in the past 12 months, from more than $1,200 in February 2023 to around $750 today.
Specific prices depend on the diamond's shape, colour, clarity and other factors.
In comparison, natural diamonds have fallen less than 19% over 12 months, from more than $5,000 for a one-carat diamond in February 2023 to around $4,100 today.
“The lab-grown diamond market is subject to the same supply/demand imbalances that affect all markets,” said StoneAlgo.
“Lab-grown diamond prices are mainly affected by declining costs for growing and manufacturing lab diamonds, increased competition from suppliers, and increased competition from jewellers which has resulted in lower profit margins at the retailer level.”
According to StoneAlgo, it is unclear whether lab-grown diamond prices will stop falling as the technology for growing diamonds continues to become cheaper and more available, which is driving up competition and driving down lab-grown diamond prices.
Furthermore, lab-grown diamonds offer little in the way of value retention and resale value compared to their natural alternatives.
Pricing pressure persists
Yet De Beers, as the world’s largest diamond miner, is clearly under pricing pressure for one reason or another.
In its first sale of 2024, the group cut prices by 10% in an attempt to stimulate demand.
In essence, the natural diamond industry is suffering the same fate as other discretionary items, with prices overcorrecting steeply following record-breaking luxury goods demand in the Covid-19 lockdown era.
Secondary Rolex prices, for instance, fell to 24-month lows last November, or 42% of their all-time high in February 2022.
Yet signs of a diamond recovery are emerging.
De Beers' rough diamond sales of $370 million for Cycle 1 (representing sales between 19 December 2023 and 30 January 2024) increased 170% sequentially as a result of US holiday demand and the resumption of sales in India.
“(De Beers’) sales are still well below previous Cycle 1 sales, but this is De Beers' highest sales value since Cycle 7 2023,” said analysts at Jefferies.
“Management noted it will take time for demand to fully recover, but diamond earnings have troughed if the US has a soft landing, in our view,” they added.
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