Aside from their beauty, what makes diamonds desirable is their perceived rarity. And with less of them to go around compared to the people who want them, jewelers have gotten away with pricing the precious gem on the more expensive side.
But what if we tell you this isn’t the case anymore? In a recent turn of events, the once in-demand stones have now lost their value — well a bit of it. The coronavirus pandemic is to blame for that. Here’s why.
Miners are currently stuck with an excess of diamonds as the coronavirus pandemic caused the demand for the stone to plummet. That means that producers are sitting on billions of dollars worth of jewels with no one to sell them to.
The five biggest producers of the precious gem reportedly have $3.5 billion in excess diamond inventories at the moment. The inventory may reach $4.5 billion by the end of the year, though, as Bloomberg reports.
To put things into context, let’s compare the sales numbers of the well-known jeweler De Beers from the same month in 2019 and 2020. Their diamond sale last May recorded made just $35 million after bringing in over $400 million last year.
Due to restrictions that came with the lockdown, jewelers had no choice but to close their stores indefinitely. Unfortunately, this meant that they also lost the crucial avenue for making their diamond sales.
Meanwhile, some small producers of the stone have resorted to reducing their prices. Miners that have continued to operate also cut down on their production.
Facilities in India are reportedly only operating at half their usual capacity.
Another problem that arose for the larger producers is that their smaller counterparts have turned to offer huge discounts as much as 25%, further bringing down the price of the gem.
One diamond producer to do so was the United Kingdom-based BlueRock Diamonds, which sold $700,000 of diamonds at an auction. Reports say that the company sold its stock at 15% less than the price they would’ve sold them before the pandemic hit.
The current ‘double whammy’ situation that the diamond industry is facing is reminiscent of what happened in the financial crisis in 2008 as Sergey Donskoy, an analyst at Societe Generale, said.