Let us start with the most simple scenario. Many years ago, the diamond industry’s biggest fear was being forgotten by Millennials. Consumers are now buying diamond jewelry more than ever before. With the industry increasingly harnessing technology to improve operational efficiency and reach an extended customer pool, the diamond industry is going from strength to strength, a trend that is expected to continue into 2022.
A roller coaster ride
Diamond industry profits evaporated in 2020 as widespread lockdowns led to store closures, operational delays, and financial strain on consumers that saw sales of the precious stone dipping 14 percent for jewelry and 31 percent for rough diamonds while cutting and polishing services closed their doors as demand dried up.
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The pandemic also forced miners to cancel or delay sales, with major diamond shows scrapped due to health and travel restrictions.
Following rocky conditions in 2020, the diamond industry proved to be resilient and delivered a strong showing in 2021. Every sector of the diamond industry performed very well in 2021 and emerged from the pandemic well-positioned for future growth.
In 2020–21, the diamond industry invested heavily in technology to gain operational efficiency, create marketing and consumer experiences that attracted buyers, and accelerate e-commerce schemes. Even smaller mom-and-pop retailers added online sales platforms to reach consumers who couldn’t shop in person or travel due to government-instituted health measures.
With some 90 percent of jewelry retailers now having online platforms to sell their wares, online searches for diamond jewelry are reportedly higher than pre-pandemic levels throughout the first nine months of 2021.
Strong online demand for diamond jewelry drove up prices and profit margins along the value chain in 2021. As rough diamond sales increased, miners increased production volumes and pulled from inventories to keep cutters and polishers busy. Healthy demand and price recovery for polished diamonds helped the industry achieve decade-high margins.
Strong growth expected in 2022
The diamond market is expected to remain strong in 2022, supporting growth across all segments, said Bain & Company in its annual global report, The Global Diamond Industry 2021-22.
Global production is expected to hit 120-plus million carats in 2022, but it 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.
Continued growth in demand and limited supply of rough diamonds will benefit both miners and midstream players, supporting further strong price growth for polished and rough diamonds in 2022.
A focus on ESG standards
As demand for diamonds has swelled once more, there has been a noted shift in exactly what consumers and investors expect from their gems, with environmental, social, and governance (ESG) standards emerging as an anticipated cornerstone for the industry’s continued development.
Pushing the purchasing process online has led to closures of under-performing physical locations, and has also widened the customer net to appeal to younger customers, who are more likely to shop online. The presence of this new audience has also been a contributing factor to the push for evidence of ESG standards, given the emphasis on sustainability.
Given the diamond industry’s chequered public image when it comes to ethical sourcing, it is unsurprising that younger consumers are calling for increased traceability, with climate impact and origin transparency the primary concerns on the list of consideration when consumers are purchasing diamonds.
For mining companies, one of the most prominent topics on the ESG agenda is carbon neutrality and so interest in this potentially greener method is rising alongside demand. Technological advancements are making these ESG standards more achievable, not only accelerating renewable tech to make mining greener, but also harnessing digital solutions to connect supply chains and offer consumers traceability.
With tools such as blockchain providing increasingly simple ways of collecting this data, the industry is beginning to see miners partner with traceability solution providers to connect supply chains and offer both buyers and customers a clear indication as to the source of their diamonds.
Sustainable diamond jewelry and alt-diamonds
In addition to traceability programs, companies have been experimenting with recycled and pre-owned jewelry, with sustainable jewelry emerging as a market to meet this demand, and recycled or repurposed diamonds are one-way companies are addressing sustainability calls.
Another growing sub-sector is that of lab-grown diamonds, emerging as a more affordable and tech-driven alternative that also offers the possibility of creating diamonds using solely renewable energy. These increasingly popular gems are “grown” inside a lab using technology to replicate the natural diamond development process.