De Beers’ Diamond Insight report says diamond jewellery demand touched record high in 2013

De Beers Group of Companies recently published its Diamond Insight Report, noting that diamonds continue to be aspirational for consumers, and the industry needs to work to support it. This is the inaugural edition of the report.

It noted that diamond jewellery demand in the world in 2013, touched a record high of US$79 billion and predicted a positive growth in demand, in the long term, spearheaded by the ongoing economic recovery in the US (the world’s largest diamond jewellery market) and growing middle class segment in developing markets such as China and India.

In the US, polished diamond sales rose 7 percent in 2013, while both India and China have seen their domestic diamond jewellery markets grow by a compound annual growth rate of 12 per cent in local currency terms between 2008 and 2013.

Within this positive backdrop, the report adds a note of caution, that while diamonds retain their special allure with consumers globally, future demand levels cannot be taken for granted. It highlighted that the diamond overall category faces increasingly ‘strong and sophisticated’ competition from other luxury categories, and that the share of diamonds in advertising voice in the US market has reduced within its competitive set.

Supply

Global rough diamond production in 2013 increased by 7 percent in carat terms over 2012 levels to a total of around 145 million carats, which is however below the 2005 peak of around 175 million carats. The report further highlights that a forecast reduction in supply from existing sources will likely not be matched by new production coming on-stream in the years ahead and diamond supply is expected to plateau in the second half of the decade before declining from 2020 onwards. Meanwhile, as mining moves deeper and towards more remote locations, the extraction process is becoming increasingly complex and costly. The three principal input costs – labour, electricity and diesel – have all seen increases well above local inflation levels in the main diamond producing countries over the last decade and this trend is set to continue.

Philippe Mellier, Chief Executive, De Beers Group, said: “Consumer demand remains the one true source of value for the diamond industry. With demand forecast to increase further from 2013’s record levels, the opportunity for growth is clear. But this must not be seen as cause for complacency. The industry will continue to lose ground to other categories if it does not invest significantly in production, marketing and technology.”

Markets

In terms of markets, the report noted China to be the world’s fastest growing market for diamond jewellery sales, with the number of diamond jewellery retail doors in the country increasing by almost 30 per cent between 2010 and 2013. Also, online has become an increasingly important channel for the diamond industry. Over one in six diamond jewellery purchases in the US was made online in 2013 and in China the internet is already used by a quarter of acquirers for research purposes before purchase. Diamonds were a major contributor to the economic performance of producing nations in 2013. In Botswana, diamonds represented more than 25 per cent of GDP and over 75 per cent of overall exports, whereas in Namibia they represented eight per cent of GDP and almost 20 per cent of all exports.

The report was launched at Hong Kong Gem & Jewellery Fair.