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Reduced Diamond Supply Lifts Polished Prices

Sentiment remained weak and trading levels low amid new COVID-19 restrictions.

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(PRESS RELEASE) Polished diamond prices firmed in July due to supply shortages for select categories. Sentiment remained weak and trading levels low amid new COVID-19 restrictions.

The RapNet Diamond Index (RAPI) for 1-carat polished diamonds rose 1.9% during the month, buoyed by improving investment demand and scarcity of D, IF diamonds. The index has fallen 4.8% since the beginning of the year.

RapNet diamond Index

Rough buying declined sharply due to lower polished demand and the forced reduction of manufacturing operations. De Beers’ and Alrosa’s decision to let clients refuse contracted supply has eased midstream liquidity concerns and helped prevent a buildup of polished inventory.

Manufacturers’ profit margins are better than before the pandemic. Polished prices have firmed for select goods, and cutters are able to buy rough that aligns with demand. Polished dealer activity is limited to online platforms. Jewelers are ordering specific items rather than bulk inventory.

Trading has become more localized as interruptions at customs have caused shipping delays. This has empowered suppliers in some centers to maintain higher prices due to shortages in their localities. Polished inventory levels have fallen, but mining companies continue holding large volumes of rough they have been unable to sell.

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The weak market is forcing companies throughout the supply chain to rethink their long-term strategies. Many businesses are adopting technological tools to improve efficiency. Mining companies recognize that they will need to customize rough supply to match consumer demand. Retailers are increasingly requesting digitized access to suppliers’ inventory so consumers can cherry-pick the diamonds they want.

While market conditions remain difficult, the diamond industry has an opportunity to implement technological innovations that will help inventory flow more efficiently through the supply chain. That should result in a more profitable trade. It should also ease the burden on manufacturers forced to hold large quantities of unwanted diamonds that have put pressure on polished prices over the past decade.

For in-depth diamond price, supply and demand data, subscribe to the Rapaport Research Report here.

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