The Future Of Diamond Commodity Trading | EEG
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Is The World Market Awaiting A Shortage Of Diamonds?

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Commodity trading industry has always been a contributing market to Dubai’s economy. Of this, one of the main industries that have flourished over the years is the diamond industry. However, studies and statistics show that within the next seven years, the global market will lose about 15 million carats of diamonds, which is, more than 10% of the global supply of natural diamonds. This will decline over the next 10 years even if the global demand for jewellery grows at least by 1-2% per year.

Although the growth in jewellery consumption may slow because of the US and Chinese trade there will be a shortage of natural diamonds leading to serious fluctuations in the price. Prices for colourless diamonds larger than 5 carats have been growing since 1978. For instance, the cost of pink diamonds has increased by 300% over the past 10 years.

The diamond prices will continue to rise, and the global supply of stones will decline over the next 10 years. This is due to the fact that the life cycle of existing assets is shrinking, and there are no significant new discoveries yet. This is supported by the results of diamond commodity trading in the first quarter of the year, which revealed a 4% decrease when compared to last year.

By 2023, the diamond supply will fall by 16%. Manufacturers will also reduce deliveries, as there are practically no new growth projects. At the same time, demand will grow by about 2-3% per year, giving rise to a deficit that will be a direct offset of rising prices for diamonds. In the foreseeable future, the US will remain the largest market for polished consumption of diamonds which is about 50%, but the main consumption growth will be observed in the Asian markets – China and India. Similarly, while the European market is stagnating, the Japanese is stable.

Traditionally, the demand for diamonds is associated with an increase in the population’s income. As the population’s income grows, the demand for diamond and jewellery will continue. At the same time, experts do not see significant risks for the industry from synthetic stones. They will occupy their niche along with lovers of high-tech gadgets but are unlikely to be able to take a significant market share.

 

Authored by:

Mariia Iurko

Associate Consultant, EEG

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