The demand for diamond jewellery has been on a see-saw ride lately. In India, diamond jewellery sales rose 16% in 2021, following a 25% drop in 2020, says Bain & Company Report, ‘The Global Diamond Industry 2021–22’. A 57% increase in weddings released pent-up demand for bridal jewellery. However, the sales still stayed 13% below 2019 levels. Leading producers of diamonds, consequently, raised their prices attributing to the recovery measures from the losses incurred with many mining operations amid Covid-19-led lockdowns and restrictions on movement of goods. Prices for rough diamonds continued to rise due to supply constraints coupled with exponential demand, especially after the pandemic.
Our diamond cutting suppliers, says Vinod Hayagriv, managing director at C Krishniah Chetty Group Of Jewellers, have been witnessing a progressive rise in the prices of polished diamonds since December 2021-January 2022 due to sudden supply shortages, despite its two-year diamond commitment and contracts in place. “The uncertainty of this upward movement of both rough and polished diamonds is proceeding stronger every week. With credible inputs, it appears that the prices may rise further due to lower supply, which holds up rough prices along with expected continuation of solid consumer demand,” Hayagriv adds.
Nishit Nanda, ED of Khimji Jewels and CEO of youlry.com, has witnessed a steep price rise all through 2021, making rough diamonds cost 30% more than previous years with an additional 5% rise in the market year for 2022, thus far.
As per Hayagriv, some exceptional rough diamonds have witnessed an even higher price rise of over 50%.
Supply constraints remained the biggest cause of the rise in prices resulting in reduced manufacturing.
Owing to the pandemic, in 2020, rough diamond production continued its steady decline, falling to 111 million carats, shows the Bain & Company report. Supply started to rebound in 2021. Net production grew 5% and reached 116 million carats. The growth however was still 20% below pre-Covid-19 levels in 2019. Cutting and polishing activities surged 84% globally, India grew fastest at 94%.
“After severe lockdowns in 2020, India’s factories reopened to replenish inventories and meet growing demand. A second wave of Covid-19 lockdowns temporarily decreased labor availability from April to June 2021, but the shortage was mitigated by vaccinations, migrants returning to work after seasonal kharif sowing, and social distancing measures,” says the report.
As per the report, production is expected to cross 120 million carats in 2022 but is unlikely to reach pre-pandemic levels within the next five years. “The largest short-term threat is new coronavirus strains that might disrupt production and logistics again. Major new projects have not been announced and investments in exploration are limited, so production growth will likely stay at 1% to 2% per year during the next half-decade,” says the Bain & Co. report.
Diamond jewellery to cost more
Jewellers believe, with no other option, the jewellery industry has to put the burden of price rise on consumers to protect their supply continuity and protect from shrinking profit margins. While jewellers refrain from quoting a figure, they are quite convinced that the sector is experiencing promising demand, growth and production scarcity support as well as stability that will further this trend much later into 2022. As things stand, says Nanda of Khimji Jewels, we’re already in the midst of seeing prices rise even higher in some instances above the average market forecast.
“We have worked hard to maintain prices till February, with our long-term agreements with the diamond cutters and suppliers helping clients to derive lower rates as long as possible, expecting rates to go up in March 2022,” says Hayagriv of Krishniah Chetty Group Of Jewellers.
We hope all mining companies have a bumper yield and a steady production to support stability for rough diamonds with controlled profit margins to facilitate the growth of the diamond jewellery manufacturers, Hayagriv adds.