Conventional wisdom holds that trading in the diamond industry should have come to a complete stop in April. This is largely true, but there are some exceptions. Polished diamond trading has continued, though at a much reduced level. Prices naturally declined, down a low single digit.
Jewelry stores in China are mostly open, and a good number of stores remained open in the US in March and April. Air traffic is ongoing, and cargo flights are still taking place. And where there is a buyer in need and an available means of shipment, there is always a seller. This is as true for diamonds as it is for medical supplies and food.
Polished diamond exports from the diamond centers were a fraction of their normal levels, down about 85% in April, according to preliminary diamond analytics figures. Exports from India fell 100%, with no exports at all. From Israel, they declined 82%, and exports from Belgium fell an estimated 85-84% year over year.
Polished Diamond Prices Ease Down
The decline in polished diamond trade led to a decline in prices. Month over month, polished diamond prices fell an estimated 1.7% in April. This is impressively steady compared to price changes during normal times. And much better than wheat (-4.7%), coffee (-11.9%), or oil (-7.2%).
Polished diamond prices declined across the board, based on our diamond analytics. Prices dropped in every single key category, with third-carats suffering the deepest declines, following five months of rising prices.
Three-carat rounds, in relatively good demand by consumers, declined the least, as retailers still made every effort to generate cash flow, based on our jewelry industry analysis.
Overall, after a bounce in prices in January following strong December retail activity, diamond prices have slowly edged down as COVID-19 took its financial toll on consumer demand for jewelry. This led prices in April to escalate the more modest downward push seen in March.
Over the long term, the smaller 0.30 and 0.50-carat size ranges fared better than larger sizes, reflecting the ongoing design trend of smaller, more intricate designs. It is interesting that the next best performing items were 2 carats and larger, catering to the higher price point market. Please see the polished diamond price index below for more.
In the past year, 1 carats, previously a popular size and a standard for bridal rings, have seen the deepest price declines as seen below on the diamond prices historical chart. This reflects a decline in demand, coupled with consumer pressure to lower prices.
US Jewelry Sales Drop 27%
According to the latest US Department of Commerce data, total jewelry sales dropped 27.4% year over year and 37% month over month in March. US jewelry sales are estimated at $3.14 billion. Whereas this is a dramatic decrease, a deeper decline in the volume of business was expected. It just does not seem deep enough.
Major retailers such as Saks and Macy’s hardly made any jewelry sales. Signet’s brand stores, such as Kay’s and Jared, were closed, as were about half of the independents. With this in mind, how could sales decline by only a quarter?
In the coming weeks, maybe months, the Department of Commerce will likely revise its April figures. It has already revised down its January-March estimates.
The worst of COVID-19 seems to be behind us. Stores around the world are starting to re-open, led by China and Hong Kong. Cautiously, consumers will return as well. Although unemployment is sky high, weddings will be held and bridal jewelry will be purchased. Spend on jewelry may be lower than before, but the volume is expected to be higher.
Once consumers start buying, it will start a chain reaction. Retailers will pull goods from wholesalers, which in turn will start up polishing and buying rough. Order restored, sort of.
Much will need to be fixed. Many companies, from miners to retailers, will close. It will result in a leaner pipeline, and that is a good thing. Most importantly, we will need to keep our collective ears wide open to what our clients really want and need. Marketing absolutely needs to be in place – powerful, precise, engaging, and effective. Without it, there is no business, and everyone needs to contribute their share.
You have not mentioned the banks. I suspect their role will be very important when many are so cash strapped
True. The good news is that from the perspective of the banks financing the diamond midstream, diamonds proved yet again to be a reliable and profitable part of their business lending portfolio.
Excellent analysis Edahn. I particularly agree with your comment that “powerful, precise, engaging and effective” marketing will be a key skill that help survivors rebuild the market.
Thanks Albe. There’s so much work to do (and opportunities to seize). Marketing, driving consumer interest, is one of the most underperforming one and requires tons of attention.