The struggling global diamond industry is pinning its hopes on a strong U.S. holiday shopping season to reduce bloated inventory levels and reignite demand for polished and rough diamonds.
Industry Challenges in 2024
Third-quarter reports from mining companies and Hong Kong-based jewelers paint a grim picture. Demand for diamond jewelry continues to decline, with Chow Tai Fook and Luk Fook reporting double-digit sales drops. Luk Fook announced plans to reduce its diamond offerings, shifting focus to fixed-price jewelry—signaling a troubling precedent for the industry.
The Bullwhip Effect: How Retail Sales Impact the Supply Chain
Analysts are watching the U.S. retail sector closely, hoping strong holiday sales will stimulate a domino effect. A small increase in retail sales could jumpstart polished diamond trading, which would, in turn, boost rough diamond demand.
“If the U.S. delivers robust retail performance, it could ease the supply chain’s burden,” explains Pranay Narvekar of Pharos Consulting. However, he warns that the reverse—tepid sales—would exacerbate the current inventory crisis.
Positive Signs in the U.S. Market
The National Retail Federation (NRF) projects a 2.5% to 3.5% growth in holiday sales, reaching $979.5 billion to $989 billion. Jewelry sales have already shown promise, with October data indicating:
- 15% growth among independent jewelers.
- A 12% rebound in diamond jewelry sales.
Despite economic uncertainties, consumer confidence is rising. The Conference Board’s index saw its strongest gain since March 2021, fueled by optimism about the labor market and economic prospects.
Pressure on the Supply Chain
Miners like De Beers have curtailed production to address oversupply, with a 25% drop in Q3 output. However, their inventory continues to grow as sales lag production. This creates urgency for a market turnaround in 2025.
The Road Ahead
While the holiday season could provide temporary relief, the industry faces a larger question: Can sustainable growth be achieved beyond December? Without strategic discipline, history could repeat itself, leading to another cycle of oversupply.
For now, all eyes are on U.S. consumers as the diamond trade waits to see if the holiday season can deliver a much-needed boost.