The coronavirus pandemic, which hit the diamond industry hard in the first half of 2020, has presented an opportunity for squeezed diamond manufacturers to turn things around and start making profit.
Squeezed by high rough diamond costs and declining polished prices, manufacturers and dealers have been struggling to make ends meet. They are caught between the mining and retail sectors, carrying high inventory levels.
The situation for the so-called middlemen were “really miserable”, said Rapaport group chairperson Martin Rapaport. Manufacturers with bank loans had to continue keeping their businesses going, despite a lack of profit.
The positive side of the global pandemic is that it has stopped the “treadmill”. Rough buying has stopped, the Indian government has offered credit holidays, interest rates are lower, reduced supply is propping up polished prices and miners have lowered rough diamond prices.
“This is your chance, manufacturers. Only buy the quality of rough at the prices that enable profit. Do not jump back on [the treadmill],” Rapaport said in an October 22 webinar.
He urged the industry to watch demand closely, warning against pushing too much supply into the market.
“Now is a great opportunity to make money. De Beers is giving us a chance to make profit.”
De Beers and Alrosa – the two biggest producers of rough diamonds – have lowered their prices in recent months as part of concessions to help their clients during the health crisis.