A recent report from De Beers supports what those active in the diamond trade in the US have already identified. The developing economies of China and India are putting increasing pressure on supplies, with DeBeers noting that the diamond pipeline was in fact undersupplied at the start of the year. De Beers estimated that global demand for diamonds in 2010 grew at 8 percent. Current 2011 forecasts call for US retailers to restock and increase their purchases by 7 percent in FY 2011. At the same time China is expected to grow at strong rate of 21 percent, driven by retail growth in both the major cities and smaller tertiary markets. India is also expected to increase by 24 percent FY 2011. America remains the largest market for diamonds using 39 percent of the world supply, while China and India’s combined consumption is approximately half of the US.

2010 Global Diamond Demand Growth vs 2011 Forecast

Recent data provided by De Beers estimating 2010 global increases in diamond jewelry demand as well as their forecasts for 2011.

What American retailers should be aware of is that Chinese consumers are beginning to purchase a much broader quality spectrum than in the past with F-H colors and SI clarities in strong demand. This is a reflection of a broadening consumer base and expanding middle class. The result moving forward is that the price of SI goods is escalating and at times selling for a premium over VS. The recent DTC May Sight saw price increases of 2 to 3 percent, and retailers should begin seeing this reflect in polished prices within the next six to eight weeks.

Because America has to a large extent been living off of a surplus of supply here in the states there is a bit of sticker shock as retailers go back into the market to replenish their stocks with inventory selling at the higher prices. This is not a situation that will change any time soon, and retailers may be well served to purchase more diamonds for stock as the premium for memo may be difficult to pass on to the consumer. Retailers may also find values in quality combinations that are not in as high a demand, possibly even moving to VS clarity. Taking into account the premium currently in place for SI goods the overall price may be similar and the supply more abundant.

In closing it is clear moving forward that we will have to become accustomed to competing with the rest of the world for diamonds and the new reality of reduced supplies and increased prices it brings. It will require us to approach our business differently, from the way we procure our stock, to how we educate our clients. As in all things those who embrace the change and adapt early will prosper and grow.

 

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