Have you just popped the question to the love of your life? Did you do the whole \u2018getting down on one knee\u2019 thing, sweating bullets in the knowledge that she\u2019s been dreaming of this her whole life, and if you cock this up she will never let you live it down?<\/p>\n
And did you fork out a two, or even three, months\u2019 salary (or, god help you, more) on that fancy diamond engagement ring?<\/p>\n
If you\u2019ve answered \u201cyes\u201d to all of those questions, I have some terrible news for you: you could have gotten out of that for a whole let less money, and you wouldn\u2019t have been alone.<\/p>\n
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You\u2019re not an idiot for falling in love, or getting married, or whatever it is you\u2019re doing in order to ensure that you don\u2019t end up dying alone, surrounded by cats who you\u2019re positive \u201creally love you\u201d but have just been waiting patiently for a chance to eat your eyeballs when you\u2019re dead.<\/p>\n
But, you might have been a bit quick off the mark when forking out colossal quantities of your hard-earned on that ring, because \u2013\u00a0spoiler alert \u2013 it\u2019s just a dumb rock.<\/p>\n
More accurately, it\u2019s a mineral \u2013 a clear and colourless crystalline form of pure carbon that I promise you is technically worth three eights of five eighths of sweet bugger all.<\/p>\n
Of course, this isn\u2019t news. Deep down, we all knew this \u2013 even as we winced in agony while forking out the GDP of a well-heeled Gold Coast apartment block on that 2-carat, flawless E-colour asscher cut monolith that\u2019s \u201ctoo nice to wear every day\u201d.<\/p>\n
What\u2019s news is that whatever you paid for that diamond is now, officially, way too much \u2013\u00a0not just because of the whole \u201cIt\u2019S JuST a RoCk!\u201d thing, but also because the retail value of that stone has crashed as well.<\/p>\n
That\u2019s according to a fella called Paul Zimnisky, whose hobbies include keeping track of what rough diamonds cost, and the news from him is not great.<\/p>\n
Yes, owning an operating, producing diamond mine is still pretty much a licence to print money, but it is rapidly becoming less economic to do so.<\/p>\n
Zimnisky has been tracking diamond prices for years, and you don\u2019t need to be an expert gemologist to see that the industry has a bit of a problem.<\/p>\n
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According to Zimnisky, rough diamond values have been tumbling since hitting record highs in 2022, to the tune of about -30% \u2013\u00a0and this year-to-date alone the market for rough stones is off by -5.7%.<\/p>\n
That\u2019s despite the global output of diamonds forecast to decline, as recently stated by ASX-listed Burgundy Diamond Mines, which told investors in late may that output worldwide is set to fall from ~121 Mcts in 2023 to about 113 Mc in 2024.<\/p>\n
With that in mind, why the falling prices?<\/p>\n
That\u2019s a simple question with a complicated answer \u2013 but if you\u2019re short on time, the cheat-sheet version is \u201cChina\u201d, and \u201cIndia\u201d with a dash of \u201cRussia\u201d thrown in for good measure.<\/p>\n
Starting with China, the news from there is that the artificial stone market is booming, alongside improvements and streamlining in the manufacturing process that has led to a significant decrease in the cost per stone.<\/p>\n
Things in that sector started to come to a head in 2022, when natural diamond prices were at their peak, and the lab-grown equivalents started falling in price, by a lot.<\/p>\n
Early in 2023, Ziminisky reported that demand for the lab-grown stones grew to around US$12 billion, while at the same time the cost of those stones fell by roughly -20% \u2013\u00a0and the market in China has played a massive role in how that\u2019s played out.<\/p>\n
Prior to 2000, the diamond market in China was \u201clargely nonexistent\u201d, Ziminisky says.<\/p>\n
However, a big push by the undisputed giant of the industry, De Beers, saw China grow in terms of market share to become the second-largest market in the world for diamond jewellery.<\/p>\n
Fast forward to 2022, and consumers in China, and around the world, started to become a little more savvy about their spending habits when it came to diamonds. The stigma that was attached to lab-grown diamonds decreased, keeping pace with a steady but deep decrease in the cost to consumer.<\/p>\n
With demand rising and costs dropping for lab-grown stones, the result was an inevitable market shift away from natural stones to the cheaper, but no less sparkly, alternative, thanks in no small part to US giant Signet Jewelers and global fashion jewellery powerhouse Pandora\u00a0\u2013\u00a0the latter of which has held an oversized presence in the Australian market for more than a decade.<\/p>\n
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The Indian market has seen a marked decrease in terms of natural diamonds, with a buying hiatus there in 2023 causing headaches for the likes of De Beers, and other major supplier ALROSA.<\/p>\n
The downturn led to both of those major suppliers stockpiling to varying degrees, with ALROSA effectively suspending all sales in October and November, and De Beers reporting a 70% drop in year-on-year sales for the quarter.<\/p>\n
That\u2019s led to De Beers shifting tactics, with a major rebrand of its Forevermark diamonds away from the loose stone market, and into a predominantly readymade jewellery product line instead, as a response to the changing tide in the Indian market, and others worldwide.<\/p>\n
Meanwhile Russia \u2013 an outsized source of natural diamonds ever since Australia effectively exited the market a few years ago \u2013 has been operating as the world\u2019s largest producer of natural diamonds by volume, accounting for roughly 25% of the global market.<\/p>\n
The bad news for Russia is that it\u2019s been slapped with a range of sanctions by the G7, aimed at slowing down that income stream in the wake of Russia being problematically expansionist when it comes to its neighbours.<\/p>\n
In March, sanctions went into force that prohibited G7 countries from buying any stones that could be polished into goods that meet or exceed a 1-carat cap \u2013\u00a0which covered an estimated 45% of the gem quality stones coming out of Russia.<\/p>\n
The sanctions are due to get even harsher in September, when the size cap on gemstones is reduced to 0.5 carats, taking about US$3 billion of the large diamond market off the table for Western consumers.<\/p>\n
Whether the increasingly tight sanctions will see an explosion in Russia\u2019s \u201ccutting 1-carat diamonds in half\u201d industry remains to be seen.<\/p>\n
China, notably, is not part of the G7, so the sanctions don\u2019t apply. But that\u2019s not a huge concern for the Chinese market, because it means China is in a strong position to underbid on those stones for the foreseeable future \u2013 all the while, making bank on the lab-grown market as production costs continue to tumble.<\/p>\n
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Against the backdrop of all of this has been Australia\u2019s fall from the top of the heap when it comes to diamond production.<\/p>\n
Once responsible for about a third of the world\u2019s diamond supply, the local industry dwindled to basically zero when Rio Tinto (ASX:RIO)<\/strong><\/a> took the decision to shutter the Argyle diamond in the Kimberley region of WA in 2020, after 37 years and production of more than 865 million carats of diamonds.<\/p>\n The other major diamond mine of note, the Merlin mine in the Northern Territory, is similarly unlikely to make a dent in the global market any time soon. It operated briefly in the early 2000s, and produced a remarkably high percentage of gem-quality diamonds, before closing in 2003.<\/p>\n It\u2019s since changed hands, and is currently controlled by Australian Natural Diamonds, a wholly owned subsidiary of ASX-listed Lucapa Diamond Company (ASX:LOM)<\/strong><\/a>.<\/p>\n At its most recent AGM, Lucapa told shareholders that exploration work has been underway at Merlin for a while, but with the company heavily focused on its two operating mines in Angola, it\u2019s unlikely that there\u2019s going to be any major announcements from Merlin \u2013 barring a radical change in fortunes as in-fill drilling at the site continues.<\/p>\n There are other, smaller operators on the ASX that are diamond-focused, but for the most part they are still deep in the exploration phase of operations.<\/p>\n That includes the likes of Gibb River Diamonds (ASX:GIB)<\/strong><\/a>, which recently announced that it has secured three key mining licences that the company says lies \u201cat the heart of developing the Ellendale Diamond Project\u201d in WA.<\/p>\n And the team at Burgundy Diamond Mines (ASX:BDM)<\/strong><\/a> seems outwardly optimistic about the future of the diamond market.<\/p>\n In its recent Investor Engagement and Diamond Market Outlook presentation, the company noted that there\u2019s been an appreciable fall in the cost-to-market of artificial diamonds, but that it remains confident that it\u2019s likely to help the natural diamond industry, rather than hamper it.<\/p>\n \u201cMarket segmentation between lab grown and natural diamonds is unfolding [into] two separate, co-existing products,\u201d the company says, adding that natural diamonds \u201cwill not be \u201creplaced\u201d, but will become more valued, particularly in the luxury jewellery space.\u201d<\/p>\n <\/span><\/p>\n The post Global price slump suggests diamonds might not be quite so forever<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"