Work hard and you will find success

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ABN AMRO predicts uncertain future for diamond industry

18 january 2019
abn_amro_logo.pngThe global diamond industry has moved from a relatively stable environment to a highly uncertain environment due to lab-grown diamonds, according to The Diamond Insights report published by ABN AMRO Bank recently.
In her report, Georgette Boele, ABN AMRO’s Co-ordinator FX & Precious Metals Strategy, refers to De Beers launching lab-grown diamond jewellery in 2018, which will result in the growth lab-grown diamond jewellery in 2019 and the years ahead - a disruptive phase for the natural diamond buyers sector on the whole as retailers and wholesalers will de-stock and hold less inventory eventually resulting in lower demand for natural diamonds as well affecting prices.
Boele points out that many people in the diamond industry are willing to jump on the lab-grown diamond bandwagon and many more will follow in the future. Her suggestion is that miners could speed up mining activity to cash in on their diamond reserves as natural diamonds may not hold their value for long. Second, the miners could stop searching for new mines as the high exploration costs will unlikely be paid back by future income from natural diamonds. Also, as prices for smaller and less desirable diamonds will decline as they can’t compete with lab-grown diamonds, so the miners will focus on good quality and larger diamonds above 0.5 carat, which still has value. Thirdly, Boele suggests that miners could launch lab-grown diamonds or team up with a lab-grown diamond producer.

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                             Image credit: Lightbox (De Beers Group)

In addition, Boele has a few strategies for lab-grown diamonds producers as well. For instance, they can secure cheaper energy supply;  focus on technology; improve their distribution, and offer lab-grown diamonds for wedding jewellery at more attractive prices.
Most importantly, in her report, Boele expects prices of rough and polished diamonds to go down for various reasons. First, cautious natural diamond buyers will scale back their natural diamond purchases; secondly, some natural diamond buyers will want to offer a wider range of diamonds, including natural and lab-grown diamonds, thus eating into the budget of buying natural diamonds; third, the power of the miners is decreasing because of higher uncertainty and the industry may change from an oligopolistic structure to a more competitive and stronger structure; fourth, if consumers are more attracted to lab-grown diamonds for jewellery, it will result in lower demand for certain groups of natural diamonds. And wider acceptance of lab-grown diamonds will result in rough and polished diamond prices moving more in sync.
Finally, the report concludes that higher lab-grown diamond production and better technology will drive lab-grown prices lower. And with consumers being the ultimate winners, they will be able to buy diamonds at more attractive prices but to be informed that they do not hold investment value.

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