It takes intense heat and pressure to squeeze out a diamond. And now, the diamond industry itself is feeling the squeeze. Commodities weakness has spread to gemstones.
What’s more, women just aren’t into diamonds like they once were.
After rising for several years, diamond prices weakened in 2015, moving in step with lower commodities prices, according to Citi Research. De Beers lowered its asking price by 3%, according to a May Bloomberg News story. De Beers—now part of the diversified U.K.-based miner Anglo American—no longer controls the industry as it once did, but it remains the world’s largest diamond producer.
Diamond prices in the industry may be falling, but Armen Darakjian, co-owner of luxury jewelry store Darakjian Jewelers in Michigan, said it’s unlikely to see the drop filter completely into the retail sector; he notes that deep discounting didn’t happen during the global credit crisis in 2007–08.
There’s another facet to this story. Diamonds may have lost a bit of their brilliance to other luxury goods, such as electronics.
Part of that might be because of a lack of marketing, say industry analysts. Since De Beers broke up, no one has been promoting the gemstones to the degree the cartel once did.
“They did a great job promoting certain styles in the ’70s, ’80s, and ’90s. You don’t see models in magazines really wearing necklaces … It’s hard to find people wearing multiple pieces of jewelry,” said Roger Prier, refinery regional sales manager at Dillon Gage, which follows polished diamond prices.
Darakjian agreed. Outside of bridal jewelry and some basic pieces, overall demand for jewelry is softer, he said.
And there’s potential for another, greater threat to the diamond industry: synthetic gems.
Lab-created diamonds are mostly used for industrial applications now. But Citi analysts said that outside of engagement rings, lab-grown diamonds may become a future threat, perhaps in the next decade.
It comes down to how consumers react.
“Recent developments have made jewelers more inclined to consider lab-grown diamonds … supporters are promoting them as environmentally friendly alternatives to mined diamonds. In the ethical controversy over ‘conflict diamonds’ mined in war zones in the late 1990s and early 2000s, some retailers are also emphasizing synthetics’ certifiable, conflict-free origin,” said a New York Times article.
Prier said new regulations have mostly eliminated issues around “conflict diamonds.” However, he said the industry is still unsure how to value synthetic diamonds.
“Everyone wonders, what does that do to my goods that are natural? What quantities do you have; how often do you make them? We really don’t know those numbers,” he said.
Darakjian said consumers generally don’t know much about lab-grown diamonds in his experience, but he has his own doubts that synthetics will catch on.
“I don’t know if people will see it as a diamond,” he said.
What’s more, the industry’s fortunes may change if a renewed marketing focus takes hold. Earlier this year De Beers and other diamond miners created the Diamond Producers Association, according to several news reports, including this one from Bloomberg News.
Their goal? To remind increasingly fickle luxury buyers that “a diamond is forever” —as the old De Beers marketing slogan went.
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