Buying Frenzy Drives Price Surge in the Hidden World of Diamonds
9 June 2021, 06:00 CEST
At the latest De Beers diamond auction this week, buyers shopping for the kind of stones used to make an average engagement ring were in for a sticker shock: some prices had ballooned by 10% since the last sale.
News of the unusually sharp increases spread swiftly through the community of 80-odd handpicked De Beers customers, according to people familiar with the discussions. But what followed was even more remarkable: within hours, some of those same stones were trading hands at a further 10% markup, as buyers who have access to De Beers flipped them to traders and manufacturers that don’t.
The spiking prices — and buyers’ willingness to pay them — are the latest sign of roaring demand in the secretive rough-diamond trade. Just nine months ago, the industry had been brought to a standstill by the pandemic. Now, the cutters and polishers who form the backbone of the global diamond market are competing fiercely for stones.
There’s several reasons behind the surge: major retailers in the U.S. and China are buying aggressively to keep up with strong sales, while rough diamond supply is tight because De Beers and rival Alrosa PJSC have limited supply to put onto the market. Perhaps most importantly, polished diamond prices — which have long weighed on the industry — are finally rising.
Diamonds have been a big winner from lockdowns around the globe as access to rival luxury offerings was limited. That first showed with stronger-than-expected holiday sales, from Thanksgiving through to Chinese New Year, and has since continued.
“The rough market is hot. There’s enthusiastic buying across all rough categories,” said Anish Aggarwal, a partner at specialist diamond advisory firm Gemdax. “There are supply shortages at the moment. That’s creating a sense of scarcity at every stage of the pipeline.”
For some in the industry, there are worries the market could be running too hot. It takes about three months to cut, polish and sell a diamond, so stones bought cheaply at the start of the year are now being sold for a big profit. That also means those buying at today’s prices are betting that polished stones will continue to appreciate in value.
And then there’s the risk that the renewed consumer interest in diamonds, driven by the lack of competition from other luxuries such as experiences and travel, could cool as more economies open up.
For now, demand shows no sign of letting up. In the secondary market, where accredited De Beers and Alrosa buyers sell to other gem manufacturers, boxes of diamonds have been changing hands for premiums between 5% and 10%, with some select parcels even higher, people familiar with the matter said.