Dutch bank ABN AMRO released its Diamond Market Outlook report on 26 June 2017, stressing that recovery in the diamond trade has grinded to a halt at the start of 2017. While at the end of last year there was a clear improvement in the diamond trade, this improvement has petered out since the start of 2017. This is due to disappointing US economic growth and consumer spending in Q1, reduced consumption in Hong Kong and Macau which affected demand for diamond jewellery, and weaker Chinese retail sales in January and February.
Antwerp diamond trade data shows that the improvement in rough trade has already peaked while polished trade never recovered. The only bright spot was exports to India which highlights picking up in activity in diamond manufacturing in India. However, the announcement of the higher GST in India brought concerns that it will ruin small traders and manufacturers.
Analysing trends shown in major markets, the report points out that weaker-than-expected US consumer spending and weak Chinese jewellery demand mean end-demand are cautious. As the US is the world’s largest market for diamond jewellery with over 40 percent market share and that the country’s household net worth and consumer spending are expected to rise thus the report anticipates US demand for jewellery to increase. However, Chinese demand remains a risk as ABN AMRO’s China economist thinks that Chinese economic growth has peaked in Q1 and will gradually slow down, not to mention that anti-corruption measures will continue to weigh down on jewellery spending. In view of these factors the report expects polished diamond to continue bottoming out though with low momentum.
For rough diamond, major producers have indicated that diamond production would increase substantially. However, due to the oligopolistic structure of the industry, mining companies will use different strategies to avoid lowering their prices.
The full report can be viewed here.
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