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“During this decade we would start seeing a decline in global output as mines are running out of diamonds,” warns Antonio Cecere

04 april 2022

antonio_cecere_xxc.pngAntonio Cecere is currently the President of Geneva Diamond Exchange / Monaco Diamond Exchange and the Principal of the Cecere Group. His ability to advise is powerful due to his substantial experience in the luxury goods sector with a track record in creating commercial success in international markets including North America, Europe, the Middle East, Asia, China and Japan.

From re-positioning the jewellery category at Montblanc, to leading the Swarovski Group team to achieve the fastest turnaround of a company ever recorded, Antonio was even awarded by HRH Princess Royal with the UK Fashion Export Award for services rendered to the industry.

Besides his commercial activities and interests across sectors, Antonio is a public speaker and also served as a professor at the International University of Monaco (INSEEC) besides having lectured at a number of universities and professional bodies.

Here, in an interview with Rough&Polished, Antonio Cerere assesses the global economy in terms of the changes in the diamond industry occurring currently and the impact it will have on the world.

Some excerpts…

The diamond markets have been stagnant in the last few years and are recently experiencing adjustments that are redefining the industry. What is this phenomenon due to?

It is a complex scenario. There are a number of factors that are influencing these shifts. There have been signals of markets recovery in some economies after several years of lethargic trade; scarcity and the increased extraction costs are starting to have measurable effects; the repercussions from the pandemic are now evident and affect cutters; and the global geopolitical instability renders more acute the widening gap between supply and demand.

With the present state of the economy, how is the polished diamond sector faring in consuming markets across countries?

If we analyze US imports of polished diamonds as they are the largest retail market, their intake in 2021 increased compared to the previous year with a 21% pick in December and an overall growth by 64% year-on-year which is beyond expectation.

The net polished import grew by almost 50% according to US Trade Data and this increase is reflective of the growing domestic demand which in turn absorbed a larger portion of the global output affecting pricing.

Shortage of rough diamonds has been the norm of late and has affected manufacturing centres across the globe. According to you, what is the current scenario in terms of rough diamond production?

I explained this process in detail during a lecture at the Bicocca University of Economics in Milan. During this decade we would start seeing a decline in global output as mines are running out of diamonds and some are starting to shut down… Argyle closure is an example.

The almost 20% decline in output in the last couple of years is not the only factor that caused a surge in rough diamond prices; the cost of extraction has also risen as diamonds are becoming increasingly more difficult to locate and mine, Petra Diamonds’ further investment of $173 million in the Cullinan pit is not an isolated case.

The combination of these two factors impacted rough diamond prices and we have seen a recent increase in revenue by all producers, from DTC to Rio Tinto to Lucara.

All this corrodes the margins of the cutters despite the price increase of the polished diamonds which will eventually be capped by the consumers’ willingness to pay (WTP).

Growing demand is an encouraging sign after the slowdown caused by the pandemic. How is the diamond manufacturing being affected?

The pandemic caused many cutters, particularly in Surat where most diamonds are processed, to either close down or temporarily leave the busy cutting plants. For safety reasons the workers returned to their villages and many did not come back yet, either for health concerns or because the companies they worked for did not survive the low prices and limited demand during the pandemic therefore closing down.

So, with a decline in productivity and a recent rise in demand, prices have increased in the most sought after smaller diamonds that have a broader appeal for cost-conscious consumers and are more widely employed in both the jewelry and watches sectors.

How are the recent geopolitical events affecting the prices?

The sanctions inflicted on Russia invariably affect Alrosa both in its ability to export and to transact; index of this is the recent decision by the Russian miner to suspend its membership from the Natural Diamond Council (NDC).

The impact will be profound and affect global output; the effects will be felt by the cutters particularly in India and influence lower grade diamond production with a broader distribution.

The international traders will consequently struggle to meet demand at a competitive price which may consistently rise in the near future.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished