According to analyst Paul Zimnisky's recent analysis for GJEPC, the demand for natural diamonds in China—the world's second-largest diamond market—has dropped by approximately 50% in 2024 so far. The decline is evidenced by performance data from major retail giants such as Chow Tai Fook and Chow Sang Sang, both showing significant setbacks in their operations in mainland China. This decrease reflects overall weakening consumer interest in jewelry.
The "bullwhip effect" is noticeable in the middle-to-downstream stages of the market, where wholesale and retail activities are affected by this substantial dip in consumer demand. The shifting dynamics have even led to speculations that India might have surpassed China as the second-largest diamond consumer market, although exact data is not yet available to confirm this.
The decline in demand can be attributed to multiple factors, including a sluggish economic environment, shifts in consumer behavior, currency exchange rate fluctuations leading to increased overseas spending, and a surge in gold prices. Despite these challenges, marketing efforts by industry giants like De Beers and Chow Tai Fook continue, potentially triggering positive consumer responses in the terminal market.
The future of the natural diamond industry remains uncertain and largely depends on China's economic recovery. While international observers speak of a structural slowdown in the Chinese economy, the outcome is not definitive. Much of the diamond industry's recovery will depend not only on economic conditions but also on consumer sentiment.
Lab-grown diamonds have also had a notable impact on market awareness and dynamics, though this influence may diminish as the market matures. Signet’s recent quarterly report, which showed a $100 million loss, highlighted that the slow recovery of the bridal market and broader economic pressures were major factors, with lab-grown diamond pricing playing a smaller role. Despite differing perspectives on the impact of lab-grown diamonds, the demand for these products has increased by 25% year-over-year, although price drops have had a more substantial effect on online platforms such as Blue Nile and James Allen.
Ultimately, the natural diamond industry is facing significant challenges, and the potential recovery of the Chinese market will play a crucial role in shaping the industry's future. While economic conditions are key, much of the recovery will also hinge on consumer sentiment and their willingness to invest in luxury items like diamonds.