A report prepared by Georgette Boele, Co-ordinator FX & Precious Metals Strategy and published on the website of ABN AMRO - one of the leading banks financing the diamond industry worldwide - says that “Diamond trade data signal a fragile improvement”.  The data referred to are the import and export statistics of main trading centres (Belgium, India, Dubai and Israel) and manufacturing centres (India, Southern African countries and China).   

“The latest diamond trade data show that diamond trade via Antwerp is bottoming out,” says the report. “Exports of polished diamonds to other main centres including the US (the largest consumer of diamonds) also show this improvement. Trade data from the two other main trading centres UAE and Israel provide a mixed picture. Diamond trade to and from the UAE appears to be stabilising while that of Israel remains very weak and there is no bottom in sight yet.”

The report adds: “India is the main cutting, polishing and manufacturing centre (90%) of diamonds world-wide. The diamond trade data for India are hopeful. They also point into the direction of a bottoming out. If we take all the above into account, there are some signs that diamond trade is slightly improving but this improvement is very fragile.”

The largest markets for diamond jewellery are the US, China, India, Japan and Europe.  Being a luxury product, diamond jewellery “has its own specific drivers”, notes the report. One of the most important ones is household net worth; this is followed by the economic outlook of a market and the opportunities for employment; and finally by the number of marriages taking place in that society.  

“In the US there is a very clear relationship between net worth and jewellery retail sales,” states the report. “An increase in a household net worth fuels demand for jewellery.” It adds that the marriage rate has declined, to some extent, since 2000 in the US, and in countries like Japan and France. However, in the US, this trend seems to be bottoming out; and any increase in the number of marriages would have a positive impact of jewellery sales at the retail level.

The report expects some improvement in the US, China and India where sales of diamond jewellery is concerned; and for polished diamond prices to stabilise “at best”. 

“Between August 2011 and February 2016, the overall diamond index dropped by close to 30%,” states the report. “Since March of this year, the index has stabilised.  The most sustainable situation for diamond prices is if end-demand picks up strongly. This would result in higher polished diamond prices. As mentioned earlier in this report, there are some signs that end-demand is improving somewhat. However, it is far too early to conclude that this trend will continue. In fact, we think that this improvement in end-demand is still fragile and might not be able to withstand higher prices.”

The report points out that as the prices of precious metals have been rising since the beginning of this year, this could “result in lower margins and/or higher prices for end-consumers”. And if polished diamond prices too were to rise “this could have a serious negative effect on jewellery demand”.

The cutback on production by important diamond miners led to some impact on rough prices.  

“The new annual production targets in carats are below that of 2015. Lower production will work initially, but, eventually stronger price competition and more transparency appears inevitable,” said the report. “Meanwhile, higher demand for rough diamonds has also supported rough diamond prices.” 

The bank, which had on January 2016 published a report titled Diamond Sector Outlook: Nothing is forever…. says that from now on it will release a bi-annual “outlook” for the diamond sector.