During the “Diamonds From All Angles” virtual conference organized by the Accredited Gemologists Association (AGA), Paul Zimnisky shared a detailed overview of the diamond market’s current state in 2024.
Paul Zimnisky (Diamond Analytics, an independent data analysis and consulting proprietorship specializing in the global Diamond business) is one of the most respected diamond industry analysts. Victoria Gomelsky on JCKonline gave a report of his point of view.
Demand will decrease
«I’m still forecasting that demand will be down, probably by a low- to mid-single-digit percentage year over year, in 2024», Zimnisky said. He pointed to economic uncertainty and the potential impact of the Federal Reserve’s future actions on consumer spending as key factors. He noted that any reversal of interest rate hikes by the Federal Reserve within the next six to twelve months could potentially stimulate demand.
Coming out from a “highly unusual” period
Reflecting on the last four years, Zimnisky described the period as “highly unusual” for the diamond market. The market experienced a sharp increase in demand following the 2020 lockdowns, leading to diamond prices reaching an all-time high in early 2022. «Since then, prices have come off anywhere from 20% to 30%, depending on the category. So it’s just been breakneck volatility. And the fun continues. Now we’re dealing with sanctions on Russian diamonds. We’re dealing with a significant macroeconomic slowdown in China. De Beers is now up for sale. The list goes on and on».
Diamond Output “Sweet Spot” for 2024
Zimnisky forecasts the global output to be around 115 million carats in 2024, which he considers a “sweet spot” for production. He pointed out that this level is lower than the 150 million carats produced in 2017 but higher than the 110 million carats in 2020, the lowest level of output since the 1990s. Zimnisky emphasized that a lower supply could support higher prices if demand increases, but he also cautioned against an oversupplied market, which could diminish the value and relevance of diamonds as a luxury product.
The mines are getting older
«There’s only one major new mine of significant size that’s commencing production this year. It’s the Luele mine in Angola. And if we look at future production catalysts, there’s really not a whole lot on the horizon».
Zimnisky expressed concern over the aging legacy mines, noting that many are approaching depletion and that there are few significant new sources of supply on the horizon. The lengthy lead time required to bring new mines into production — exemplified by Canada’s Gahcho Kué mine, which took 25 years to develop — suggests that future supply will likely remain constrained.
Overstocked supply chain is an issue
On the demand side diamond prices have always been subject to short-term volatility. The market is currently dealing with an overstocked supply chain, which Zimnisky expects will take time to deplete, likely extending into 2024 and 2025. The diamond demand tends to correlate closely with GDP. While the U.S. economy has been performing better than expected, inflation remains a concern, impacting consumers’ ability to spend on discretionary items like diamonds.
The surge of synthetic diamonds. Now 20% of global market
Synthetic diamonds have seen explosive growth since going mainstream around 2017-2018, particularly in 2021 and 2022. Lab-grown diamonds now account for approximately 20% of global diamond jewelry demand, a significant increase from just 1% in 2015. The ability to produce lab-grown diamonds in various sizes, colors, and clarities has driven down prices and increased supply, creating a significant impact on the natural diamond market.
Currently retailers have a better profit from lab-grown diamonds but a shift to natural is around the corner
The appeal of lab-grown diamonds, according to Zimnisky, lies in their novelty and lower price points, which have attracted consumers and retailers alike. Retailers, in particular, have embraced lab-grown diamonds for their higher relative profit margins compared to natural diamonds.
«Now the question becomes, this year and going into 2025: Will these reduced profit margins for lab diamonds ultimately lead to a pivot in a lot of jewelers’ propensity to push lab diamonds over natural diamonds? If that happens, that could certainly be a big catalyst for the natural diamond industry».
