The Global Diamond Industry 2020–21
Production decreased by 20% in 2020 YoY
The report updates a long-term outlook for the diamond industry through 2030
Update 1: Recently in a joint effort between Bain & Company and AWDC, published the report, The Global Diamond Industry 2020–21. In their note the report said, “Welcome to the tenth annual report on the global diamond industry, prepared by the Antwerp World Diamond Centre (AWDC) and Bain & Company.
This year’s edition covers industry performance in 2019, effects of the Covid-19 pandemic in 2020 and an update on consumer preferences and attitudes. We also assess potential recovery scenarios in 2021 and beyond.”
The report begins with key developments along the value chain, including industry trends that were accentuated or accelerated by the global pandemic. We review factors that influenced rough diamond production and sales, midstream performance, and global diamond jewelry demand in major markets.
We updated our long-term outlook for the diamond industry through 2030. The 2030 supply-demand forecast considers announced production plans, recent changes in mining operations, potential additional sources of supply, expected changes in global and regional macroeconomic parameters, and potential impacts from lab grown diamonds.
Here are the choicest part of the Key summarized points that says, the diamond industry suffered during the Covid-19 crisis but fared better than the personal luxury market overall.
Across the value chain, revenues decreased by 15% to 33%. Operating margins followed with a decline of 1 p.p. to 22 p p. Despite the significant drops, $64 billion diamond jewelry retail performed better than the personal luxury market, which contracted by 22% at current exchange rates in US dollars.
Rough diamond production continued its downward trend, falling to 111 million carats. After peaking at 152 million carats in 2017, rough diamond production has declined by about 5% per year. In 2020, production decreased by 20% compared to 2019 levels. Notwithstanding changes, the mix of diamonds remained largely constant, with medium and large diamonds accounting for 25% of production volume in carats but around 70% to 80% in value in US dollars.
The
mining response at the start of the Covid-19 crisis helped midstream players
weather the worst of the storm. Major miners canceled sales in the first half
of 2020 and allowed clients to postpone purchases. Upstream inventories of
rough diamonds grew to 65 million carats by the end of third quarter, before
decreasing on the strength of the fourth-quarter sales to 52 million carats
(+17% to end of 2019 inventory level).
Despite
challenges in 2019, midstream players finished the year on a strong note. The
midstream started 2020 with 9% less inventory, healthier financial balance
sheets and a more consolidated market structure. In 2020, midstream players
cleared existing stockpiles even further and reduced inventories by 22%.
The midstream segment lowered its debt by half compared to its peak level in 2013; debt levels decreased to $8 billion in 2020. Financing decreased because of lower trading levels and a higher reliance on self -financing.
Larger midstream companies with transparent operations continued to access financing from big banks, while alternative financing options (e.g., peer-to-peer financing) emerged for smaller players.
Large midstream companies, banks in the Middle East and specialized funds were set up to provide additional financing in the sector. Deleveraging is expected to speed up restructuring and consolidation of the midstream and to create long-term benefits across the pipeline.
Prices
for rough and polished diamonds continued to feel pressure. Rough and polished
diamond prices began trending downward in 2018, then decreased by 7% and 4%,
respectively, in 2019, as a result of overstocking in the midstream. In 2020,
rough and polished prices fell by 11% and 3%, respectively.
Divergence between rough and polished price dynamics helped midstream players post record-high operating margins in 2020. Higher-quality diamonds recovered faster, ending in positive territory compared to the start of 2020 and recovering most of their price drop from the past two years.
Lockdowns, travel restrictions and economic uncertainty contributed to lower diamond jewelry sales. Sales were −15% in 2020, with most of the decline happening in the first and second quarters.
In addition, demand for diamond jewelry became more localized due to travel restrictions. Demand returned during the fourth quarter, culminating in a strong holiday season across the globe.
Once
fully tallied, we expect 2020 sales to be better than analysts predicted based
on the first three quarters. Preliminary estimates show growing consumer confidence
and an increase in pre-holiday retail activities.
Also read: https://gjtownindia.blogspot.com/2021/02/millennials-and-gen-z-affinity-for.html
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