Jewellery Technology & Machinery - JTM
Robert Bouquet joins the NCDIA Team

The Natural Color Diamond Association is proud to introduce the newest member of our team, Robert Bouquet. Robert will be reporting on the diamond market and how the pipeline connectivity affects all aspects of the jewelry industry including natural color diamonds. Roberts' experience and intuitive opinions will give insight into the global natural diamond trade and will provide information for greater transparency and movement of the ever changing cycles of supply and demand.

Alan Bronstein
President, The Natural Color Diamond Association



Robert Bouquet has worked in the diamond space for over 25 years. He has developed a deep knowledge of the global diamond pipeline and key producer strategies.
He has worked for two major diamond producers, diamond marketing companies, developed diamond exploration companies and performed a variety of industry-related consultancy projects across the globe.
Based in Antwerp, Robert will share his views on how the diamond trade is performing with his unique insight and perspective.



NCDIA International Diamond Market Snapshot - August 2020

Introduction:

At the beginning of 2020, and after a difficult year for the industry, there were positive signs of an improved diamond market and optimism prevailed. Very few could have predicted what was about to hit the world and very few can now be unaware of the impact of Covid-19 on us all.

There are of course parallels that can be drawn with the financial crisis of 2008-9 and its impact on the global diamond industry; yet the human, social and economic costs will remain in our collective memory once the pandemic is no longer with us. Of course, once the pandemic has ceased, there will remain multiple other challenges to the future prosperity of our industry in terms of what seems to geopolitical tensions, trade wars, social uprisings and macro and micro-economic shocks.

Today we remain in the eye of the storm and the diamond industry has little choice but to take remedial action and wait for these tragic external events to pass. The industry will rebound in due course although perhaps in rather different shape.

From a supply and middle-market perspective we are seeing a sharp contraction which will only be reversed once jewellery demand calls for it; the irony is that the industry will emerge in healthier shape, despite the difficulties it will have to endure in order to get there.

For this inaugural editorial, on behalf of the NCDIA and its members, we focus on the rough diamond space within the pipeline and look at some key developments over the year so far:

Exploration & Mining:

It has been an unprecedented year for mining houses so far. Q1 began in decent shape as sales were healthy and there was cautious optimism for a better year; all eyes were on the majors to see how they handled the volumes into the market.

As Covid-19 hit, the market effectively shut down firstly in Hong Kong and China, but then across Europe, the US and critically India, the main diamond polishing centre. Exploration efforts, which these days are already very much reduced in scope, have been hampered significantly in diamond countries due to local and international lockdowns.

All diamond mining companies have taken significant hits in 2020.

The 2 majors, De Beers and Alrosa have adopted similar policies of holding firm on prices and accepting deferrals in purchases by their clients while reducing production for 2020 (DB -7mcts and Alrosa -6mcts) to limit the significant accumulation of rough stocks. The result of these policies will mean drastically reduced sales for 2020 and poor financial results. Alrosa has the benefit of being able to sell excess production to Gohkran in times of need and will probably do so shortly. De Beers recently announced impending layoffs across the group and the greater application of technology to streamline its businesses and improve operational efficiencies.

The smaller producers have also suffered. Some have shut up shop and put their mines on care and maintenance (such as Stornoway's Renard mine and Dominion's Ekati mine both in Canada, Lucapa's Mothae project in Lesotho) to ride out the storm. Others have reduced production or sold into the smaller demand that exists at prices of 15-30% lower than January (pre-pandemic). If De Beers or Alorsa had chosen to lower their prices the smaller producers would have fared even worse.

What is also a new feature is the increase of online, remote (blind) sales due to travel restrictions and the switch to greater use of technology will likely continue going forward.

Financial weakness and the burden of excessive, unserviceable debt is putting several producers on the brink of collapse, and while this is sad to observe, the reduction in supply will be a necessary factor in allowing the industry to restart once better times return.

It has been well documented that Argyle mine in Australia will close at the end of the year, resulting in 12-14mcts less production of small, low quality and brown stones and of course the fabulous pink production that is unique to this source.

I predict that production for 2020 will be drastically reduced, down to around 100mcts (from 130mcts in 2019).

All eyes are on the next 2 quarters to see how the market recovers, and for the diamond miners it cannot come soon enough. Many stakeholders are uttering expectations of a Q3 rebound, but nobody really knows what is around the corner, and we all wait with baited breath.

It is not all bad news though; large stone recoveries have continued in 2020 including another mega rock from Lucara in Botswana (549ct stone) and several large stones from Gem Diamonds' Letseng mine in Lesotho.


549ct gem quality stone recovered from Lucara's Karowe mine in Botswana
Copyright: Lucara Diamonds

Rough Market/Trading:

What began as a positive year, rapidly dissolved with the onset of the pandemic in March. The trade effectively closed and has not reopened yet. Minimal sight goods from either De Beers or Alrosa are being bought at present, so the trade is focussed on smaller parcels of supply and very much on a "needs only" basis. Trading halls have closed, then reopened and closed again as fears of a second wave increase.

Critically the key manufacturing centre of India closed in April and the GJEPC has urged that rough sourcing either be stopped entirely or only occur where absolutely necessary. The same thing happened during the 2008-9 global financial crisis when India banned imports of rough for a month. Everyone is extremely cautious about buying rough and simply put: there is very little demand right now.

Factories have now reopened but are operating at greatly reduced capacity and employing social distancing procedures strictly or they face closure.

The market has had the worst 5 months on record. In Antwerp alone, it was reported that over 1000 jobs have been lost in the diamond district. And yet, a recovery will happen when the world reopens. Polished supply will eventually dry up, especially with such limited manufacturing taking place in 2020, and demand will return. Small signs of demand for rough in the trade is already becoming apparent and polished prices seem to be firming due to shortages of certain articles.

The industry will recover - and a consolidated, leaner and more efficient middle market will emerge.

• Bain forecasts that luxury market will contract by 20-35% in 2020
• Noticeable switch to adoption of technology to assist jewellery sales globally, with focus on digital channels and online sales
• Major auction houses holding online jewellery sales events with good success and increasingly higher value jewellery items
• Marketing focus shifting to capture the expected emotional consumer rebound and the opportunity for diamond jewellery sales
• Signs of recovery in luxury sales in China (but not Hong Kong) and US to a lesser degree

- by Robert Bouquet

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