Diamond Prices Fell 9.7% as Lockdowns Cripple Mining and Trade

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Lockdowns Disrupt Diamond Mining and Supply Chains

Governments imposed lockdown measures in nations across the globe. Travel and border restrictions harmed diamond mining, manufacturing, and the wider supply chain. Border restrictions suspended almost all imports and exports. Artisans who cut and polish raw diamonds had to stay home. Social distancing rules and strict hygiene procedures kept miners working while limiting the industry’s exposure to risk.

Demand and Prices Fall Sharply

The pandemic reduced demand for luxury goods as people focused on more urgent priorities. De Beers’ March sales report showed revenue for 2020’s second sales cycle (of 12 cycles per year) dropped 28%, from $496 million to $355 million. The lockdown hurt the market, but De Beers refused to lower prices to manage stock levels. Instead, the company halted production and let diamonds accumulate to protect market value.

India holds the world’s greatest concentration of polished diamonds, yet its raw diamond imports fell from $1.5 billion in February to just $1 million in April. Polished diamond shipments also dropped 26% year-over-year, falling from $2.18 billion in August 2018 to $1.64 billion in August 2020.

The RapNet Diamond Index (RAPI), the industry’s standard for diamond pricing, recorded a 9.7% drop in one-carat diamond prices during the first quarter of 2020, and a 13.1% decline year-over-year. Prices for 0.50-carat diamonds fell 4.9% in the same quarter and dropped 9.5% year-over-year.

African Diamond Mining Takes the Hardest Hit

The pandemic affected artisanal, small-scale, and large-scale mining operations across Africa, but smaller businesses suffered the most. Guinea’s diamond exports fell dramatically in the first quarter of 2020, dropping from around 270,000 carats in January to just 39,494 carats in April. Cameroon has not exported a single diamond since the lockdown began.

Illicit Buyers Exploit Desperate Sellers

Unscrupulous buyers took advantage of the crisis to purchase diamonds at rock-bottom rates. In Zimbabwe, for example, the price of a one-carat diamond dropped from SSL 5,000,000 to SSL 2,500,000 after the outbreak began, a 50% decrease. Many regular customers simply didn’t have money to spend. As a result, desperate miners sold to these new illicit buyers at half price. Once trade restrictions lifted, these buyers likely planned to sell their stockpiled diamonds for a profit.

The sharp fall in profitability, combined with labor restrictions, pushed many artisanal miners to abandon diamond mining altogether and turn to other work, such as agriculture.

Falling Prices Create an Opening for Buyers

Diamond manufacturers and merchants worry about falling prices, but the moment looks ideal for diamond buyers. As lockdowns gradually lift in some countries, confident, affluent investors have seized the chance to acquire large, high-quality diamonds. Illicit companies also seek out and stockpile artisanal diamonds, hoping to sell them at a profit once supply constraints ease.

Diamond mining companies like De Beers and Alrosa worried about the Covid-19 crisis, but they defended their markets. Since they refused to lower prices to manage inventory, diamonds simply piled up. According to Gemdax partner Anish Aggarwal, these companies limited the supply of raw diamonds specifically to protect the market and its value.

Signs of Recovery Emerge in the Diamond Market

After the outbreak paralyzed the diamond sector, De Beers agreed to cut prices on its larger-carat raw diamonds. That move paid off: De Beers reported an 11% year-over-year sales gain of $320 million in August, driven by a stronger diamond market. The company also saw its highest volume of sight purchases since January, as rough diamond demand rose ahead of the Christmas season.

Manufacturers, producers, and merchants across the supply chain now focus on the Covid-19 recovery. They plan to develop and support the artisanal diamond sector while tightening loopholes that enable illicit dealing.

Several countries have started easing their Covid-19 restrictions. India’s diamond production has restarted at half capacity, and Chinese stores have reopened. Official statistics show Belgian polished diamond exports grew 6% year-over-year in August as demand increased. Retailers that shifted to online sales are now seeing increased revenue.

What’s Next for the Diamond Mining Industry

Diamond miners in numerous countries are exploring new approaches to sustain the industry. Trade data now shows evidence of recovery, and diamond price declines have started to slow. Every player in the supply chain is searching for new ways to revive struggling sectors, including artisanal and small-scale diamond mining. Industry groups are also working to eliminate illegal and exploitative trade.

India’s manufacturing output has risen by 50%, while trade has reopened in China and Belgium. Two factors will determine whether the diamond mining industry fully recovers: rising demand for diamonds and a resurgence in jewelry sales.