ABN AMRO Report: Nothing Is Forever

In-depth
20/01/2016 23:39

In a recently released report, diamond industry financier ABN-AMRO takes stock of the global diamond industry and concludes two crucial forces in a changed industry landscape will determine the future of the industry; increased price competition and the potential impact of synthetics.

High rough prices in comparison to polished prices have led to a midstream squeeze, the report states, which resulted in an unprecedented pushback by the middle segment - refusing to buy goods from the major producers - at those prices. Regardless of whether or not the latter should now lower prices or decrease production, ABN-AMRO analyst Georgette Boele believes that in the long run, greater transparency and stronger price competition will be inevitable. The current situation, the report says, will lead to consolidation, a survival of the fittest. This trend could be further amplified by big retailers moving further up the chain. That will result in more buying power for those who survive and more price competition on supplier level.

Synthetics, the report further states, "could potentially turn the industry upside down", as a sustainable alternative that could compensate for the projected decrease in supply of natural diamonds. Although the report believes "it is unlikely that lab-grown diamond will push natural diamonds from the throne", the natural diamond industry needs to acknowledge it needs to address pipeline integrity to successfully counter the "sustainability"-angle synthetic producers are pushing forward.