Weak Diamond Demand In China Casts Shadow Over Entire Industry

Market Analysis
20/10/2015 10:34

It seemed that the good times would never end, as Chinese diamond jewelry demand increased 16% a year from 2009 to 2014 and prices for rough stones gained more than 20% for three straight years from 2009 to 2011, writes Thomas Biesheuvel at Bloomberg. Chow Tai Fook and other Chinese retailers rode the wave and opened thousands of new stores, and they needed to stock them with gems. But the economy of China - the world's second largest diamond jewelry market after the U.S. - has stagnated, and the precious stones are no longer moving through the pipeline: if consumers aren't buying, retailers aren't selling or purchasing from manufacturers, who cannot move their inventory and buy new, overpriced rough. Furthermore, the traders that depend on finance to fund the purchase of rough diamonds "have been hit by a credit crunch as lenders including ABN Amro Bank NV and Standard Chartered Plc have curbed loans to lower their exposure."

Biesheuvel provides an overview of the impact that slowing Chinese demand is having throughout the industry, from miners to retailers, and the steps being taken - such as lowering diamond production, purchase deferrals, new marketing campaigns - by the major players to right the ship. Whether it is a "catastrophe", as Guy Harari, co-founder of rough-diamond trading platform Bluedax claims, is yet to be seen. In any event, the diamond industry has had to curb its enthusiasm about diamond demand from the emerging markets.