Diamond glut won’t be forever

What to do with piles of diamonds, asks Thomas Biesheuvel on Bloomberg. Diamond giants De Beers and Alrosa have “barely sold any rough diamonds since February” after refusing to cut prices in response to the pandemic. So gemstones have been piling up. Industry specialist Gemdax thinks that the industry’s top five producers are sitting on $3.5bn of excess inventory. By January 2021 that could hit $4.5bn, “about one-third of annual rough-diamond production”.

The preference for stockpiles over price cuts is a familiar tactic in the luxury goods industry. Historically, the likes of Burberry have gone so far as to burn “excess inventory” rather than offer discounts, lest they sully their reputations for luxury, writes Greg Petro on Forbes. Consultants Bain & Co. forecast a 20%-35% global contraction in demand for personal luxury goods this year. 

For diamonds, a product that “relies on sight and touch”, the challenge of lockdown has been acute, says the Financial Times. The entire supply chain is being squeezed, from Indian diamond cutters disrupted by shutdowns to jewellery retailer Signet, which will close 380 stores in the US and UK. On a brighter note, there has reportedly been strong demand for diamonds from China since reopening, thanks to the bridal business. “People have rediscovered what’s important to them and [are] committing to their partners,” says Stephen Lussier of De Beers.