De Beers released its ‘Diamond Insight Report’ for 2016 on 15 September 2016 to offer an outlook of 2016 for the diamond industry, to analyse the entire diamond industry value chain and the needs of millennials and the future of diamonds.
The report lists nine fundamental trends of the industry:
The first is economic volatility. Due to volatile global economic growth, businesses become more highly leveraged, markets become more highly interconnected, current account imbalances widen, foreign exchange fluctuates and geopolitical instability increases.
The second is continued growth in demand from emerging markets. Driven by increasing household income in the next decade, Asian customers, especially from India and China, will continue to push positive consumer demand growth.
The third is there are new consumer preferences. By 2030 retiring and elderly consumers will generate the majority of global urban consumption growth, followed by millennials. In terms of consumer preferences, there will be increased focus on self-expression so design-oriented and branded jewellery will have increased relevance. Economic empowerment will drive self-purchases especially among women and demand for lower entry-point diamonds will rise.
The fourth is retail innovation. The continuous innovation of global luxury players especially in retail, omni-channel, attraction of travellers, more sophisticated consumer segmentation means stronger competition for other luxury categories. Retailers that focused on branded diamond jewellery will be able to differentiate themselves from generic propositions.
The fifth is increasing pressure on the midstream. Financing challenges are expected to persist for the midstream. Increasing transparency throughout the supply chain is expected to be done through digitalisation, which may lead to potential disintermediation of players without value-added services.
The sixth is higher mining costs. Unit capital cost and unit costs of energy, labour and consumables are expected to increase as a larger share of production is expected to come from deeper mines that are complex and costly to operate.
The seventh trend is that production of rough diamond is expected to remain predictable and relatively stable over the next 10 years.
Next, diamond producing countries, especially in southern Africa, will continue to look to maximise the value of diamond assets. The expected rise in local beneficiation will put increasing pressure on midstream margins.
The last trend is the increasing capacity to produce synthetic diamonds at a lower cost. While consumer demand for synthetic diamonds is currently negligible, the capacity to produce gem quality synthetic diamonds will expand and the cost of production and the value of synthetics are expected to drop.
Click here to read the full report can be accessed from De Beers’ site.
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