Is a Diamond Market Supply Crunch on the Horizon?

Is a Diamond Market Supply Crunch on the Horizon?

At the end of 2013, when Diamond Investing News (DIN) published its 2014 diamond outlook, many analysts were predicting that the year would bring market stability and perhaps higher diamond prices.

However, as the year has progressed, concerns about diamond supply have risen to the fore, leaving many curious about whether stability is truly in the cards. Market watchers are also wondering if much higher prices than anticipated are in store.

To find out more about what's going on with diamond supply and demand, DIN got in touch with independent diamond industry analyst and consultant Paul Zimnisky. He's written extensively about diamond market trends on his website and elsewhere, and agreed to help DIN suss out what's next for the diamond market.

Demand on the rise

Part of what's been spurring concerns about diamond supply is the fact that demand for the gems is growing, largely due to increased demand from China. As Zimnisky explained, "the current generation is the first to adopt the western tradition of giving diamond engagement rings." Driving home how significant that is, he added, "the number of urban Chinese brides being given a diamond engagement ring has increased from less than 1 percent to greater than 50 percent over the last 20 years; half of China's population of 1.3 billion is urban."

Nearby India is also worth mentioning, said Zimnisky. "Diamonds have a solid legacy in India, and the rapid growth in middle class households and growth in personal disposable income there is having a significant benefit on the industry," he noted. And, though demand from that country has been dampened in the last couple of years, "recent parliamentary elections have resulted in improved economic confidence in India" — in fact, Anglo American (LSE:AAL) mentioned in its most recent quarterly earnings call that it believes "India in particular will have a significant impact on De Beers in the second half of 2014."