The GJEPC held a webinar on the ‘Diamond Industry’s Recovery Options & Way Forward’ featuring De Beers’ Paul Rowley, Alrosa’s Evgeny Agureev, Commerce Ministry Economic Adviser Rupa Dutta, and GJEPC Diamond Panel Convener Sanjay Shah at 4:00 pm (IST) on 17th August. The session was moderated by GJEPC Chairman Colin Shah. 

Key takeaways:

The diamond industry has responded very well across the pipeline amidst the crisis. Markets are opening up and demand is picking up a little and the actual market is in a much better position, thus allowing all to breathe a little easier, and operate into a new normal.

Alrosa and De Beers allowed customers to defer buying and avoid excessive stocking, thus giving maximum flexibility to customers as a responsible approach. Miners supported the midstream and took a responsible approach by making only demand-driven decisions; this provided confidence to the midstream.

The outlook for 2020 depends on a number of factors that are external to the industry and could possibly delay market recovery. The midstream will greatly restock in 2021, provided end consumer demand continues to recover. However, one should expect the midstream to consolidate with smaller players leaving the market.

Retailers will have to start to restock by the year end, although the magnitude will not be sizeable -- only at 2019 levels. Retail demand for diamond jewellery is down by 25% and market participants think demand for luxury goods will return by 2023. The growth of online platforms will be the trend in our industry.

The Indian industry has seen improvement in demand for certain types of inventory, and there are shortages in some select categories. Still, a good part of the inventory is not moving. The trade should be cautious and take steps to reduce inventory further.

China may see a 20% uptick in retail demand and B2B sales could pick up from September to January, but the Christmas wholesale business will be down by 30-40%. In the future, demand will be driven by decisions that are win-win for all stakeholders.

As all diamond and jewellery activity came to a grinding halt in March, Indian industry leaders came to a general understanding to safeguard the value of our collective inventory worth approximately $6-7 billion. Manufacturing should be a reflection of true consumer demand and the industry has the maturity to operate its own demand-supply mechanism.

The Indian industry acknowledges the full flexibility that De Beers and Alrosa offered to their clients. This served the collective good of the pipeline, helped India clear some inventory, improved cash positions, gave retailers a sign that diamond prices would hold, and kept diamond prices from going into free fall.

There is no guarantee that a rough price reduction will bring margins to the midstream as the world is complicated and not as linear as before, and demand will be specific and sporadic.

Covid has improved the financial compliance of the diamond industry and accelerated the process of making it more bankable. Bank debt has reduced to less than half, from a high of $13-14 billion in the last decade. 

Direct sales of rough from the two Indian Special Notified Zones will be a game-changer for the industry, especially for the MSMEs - although the industry and government have yet to resolve the issue of the turnover tax rate.

Even though the pandemic has cut everyone off physically from each other, it has only intensified the bonds between loved ones. Once the world emerges from this unusual crisis, there will be renewed focus on personal relationships - and diamonds will once again play a crucial role not only as the ultimate expression of love, but a celebration of life itself!