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December 16, 2017

Rough diamonds to grow 1% to 4% annually!

The Global Diamond Industry 2017 report published

The Global Diamond Industry 2017 is the to the seventh annual report on the global diamond industry prepared by the Antwerp World Diamond Centre (AWDC) and Bain & Company. This year's edition covers industry developments in 2016 and the first half of 2017 and discusses both the challenges the industry faces and how it is turning them into opportunities.

The report begin with key developments along the value chain. In subsequent sections, that review factors that influenced rough-diamond production and sales, midstream performance and global diamond jewelry demand in major markets. The outlook for 2017 is stable across the different segments of the value chain.

The revenue of rough-diamond producers declined only slightly in the first half of the year, reflecting a return to normal trading conditions. Retail sales are sending positive signals across the key markets of the US, China and India. Rough prices rose and polished prices fell, again putting pressure on cutting and polishing companies.

The midstream segment's future health will depend on the interplay of rough and polished prices as well as the segment's ability to make continued operational improvements. On that front, midstream players are focusing mainly on reducing days to market and improving rough-to-polished yields.According to the report there are three key, persistent challenges facing the diamond industry, and the industry is renewing efforts to turn them into opportunities.

 

1: One of the most urgent challenges is the slowdown in demand for diamond jewelry. As competition from other luxury goods and experiences intensifies, rough-diamond producers are boosting their investment in promoting the diamond story. Producers will likely invest an aggregate $150 million in marketing in 2017, an increase of about 50% from recent years, in addition to retailers' own marketing spend. Additionally, the industry is renewing its approach to marketing to address evolving demand.

2: The second challenge is the mounting risk that lab-grown diamonds will illegally infiltrate the natural-diamond supply chain or legally erode natural diamonds' market share.

Industry players continue their drive to protect the supply chain from illegal lab-grown diamonds and discourage substitution by legal lab-grown stones. Their work centers around detection, disclosure and differentiation—or the "three D's," in industry terms. The industry participants are fully supportive of these initiatives and detection technologies have developed rapidly over the recent years.

3: The third challenge is the financial stability of the midstream segment of the value chain. The most effective players have robust businesses, but the segment at large still needs to address chronic constraints. Chief among them are securing access to financing and continuously improving business models to sustain profitability amid price volatility.

Equally the report also focus about efforts to build an investment market for diamonds continue, with the Indian Commodity Exchange launching diamond futures trading. The diamond market's long-term outlook remains positive.

They say, “We expect demand for rough diamonds to grow 1% to 4% annually, relying on strong fundamentals in the US, the continued growth of the middle class in China and India, and the strong and growing desire of consumers for diamond jewelry. The rough-diamond supply is expected to remain stable through 2030.

This report was prepared by Olya Linde and Genia Kudryasheva, Partners from Bain & Company, and Oleg Geyler, Principal from Bain & Company, together with Ari Epstein, Chief Executive Officer, AWDC, and Stephane Fischler, President, AWDC. The authors were supported by a global team, including Yury Glazkov, Sophia Kravchenko, Yaroslav Karakai, Daria Safonova, Vasily Lovkovskiy, Fedor Zakharchenko, Anton Matalygin, Julia Gavrilova, Masha Shiroyan, and Bain’s Mining and Luxury Goods practices.

(Reader’s Note: Sooner the report would be upload!)

 

 

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