The annual Bain and Company report always provides a great snapshot of the diamond industry, summarizing the past year and projecting for the future with lots of great graphs and charts. By all accounts, things are looking up for the industry as stated in the Foreword. "Every sector of the diamond industry performed well in 2021 and emerged from the COVID-19-induced crisis well-positioned for future growth." "Diamonds hit an emotional chord, which had been carefully cultivated by years of targeted marketing campaigns and storytelling." This is the first year in a while that a graph showing optimistic and conservative estimates for rough demand and supply many years out is not included. The graph always showed an impending gap between supply and demand. Many of us used that graph in our company presentations. For a number of reasons that gap between supply and demand never quite materialized. Maybe we are now on track for that to finally happen. The graph below tracks rough and polished prices from 2004 to the present. 2021 figures are only an estimate and are probably low for rough. In his February newsletter, Paul Zimnisky stated that rough prices reached an all-time high in January.
Following are a few takeaways from the Bain report:
1) In 2021, revenue increased 62% for diamond miners, 55% for cutters and polishers and 29% for diamond retail.
2) Profit margins across the value chain recovered to pre-pandemic levels.
3) Rough diamond sales rebounded over 60% in 2021, eclipsing pre-pandemic levels.
4) Rough production fell to 111 M carats in 2020, increasing to 116 M in 2021 which was still 20% below 2019 levels. Production of 120 M carats is estimated for 2022.
5) In 2021, a 16 M carat supply increase from Botswana, Canada, Russia and South Africa was offset by the loss of 11M carats from Argyle which closed in November 2020.
6) De Beers has committed to carbon neutrality by 2030 and ALROSA is working on a plan.
7) Rough producers are working hard to improve the information consumers receive on the origin of their diamonds.
8) In 2021, cutting and polishing activities increased 84% globally.
9) US retail jewelry sales showed 23% growth in 2021 relative to 2019.
10) The diamond market is expected to continue its climb in the first half of 2022, with two possibilities after that, "continued rebound" or "short-term readjustment".