20151207-Bain-The_Global_Diamond_Industry_2015_Growth_Perspectives_amid_Short-Term_Challenges_40页_7mb

THE GLOBAL DIAMOND INDUSTRY 2015: Growth Perspectives Amid Short-Term Challenges

Introduction
This report, commissioned by AWDC and prepared by Bain & Company, analyzes the global diamond industry in 2015. It examines key developments along the diamond value chain, reviews market dynamics, and assesses short-term challenges and long-term prospects.

Key Findings

1. Market Dynamics

   • In 2014, the diamond industry value chain grew by 4–8%, but slowdowns in Greater China and stock accumulation led to price declines in 2015.
   • Polished and rough diamond prices dropped significantly since mid-2014, reaching an 8–15% decrease from January 2015.
   • The greater China market showed signs of turbulence in the short term, driven by consumer uncertainty and stock market crashes.

2. Revenue Decline

   • Rough-diamond revenues increased by 8% in 2014, but rough-diamond production volumes fell by 4%.
   • Mid-market companies, particularly in the cutting and polishing sector, faced profit erosion, with margins deteriorating to near zero in some cases.
   • Stock accumulation and reduced demand from Greater China were the primary drivers of price drops and revenue declines.

3. Industry Challenges

   • One of the major short-term challenges is unsustainable profitability in the mid-market segment of the diamond pipeline.
   • Changing consumer attitudes in Europe, Japan, and the US may affect long-term diamond demand.
   • The penetration of undisclosed synthetic diamonds could undermine consumer confidence, though this is not expected to significantly impact the market in the short term.
   • Another challenge is the need to stimulate investment demand for diamonds beyond traditional jewelry.

4. Long-Term Outlook

   • The long-term outlook remains positive. Demand is projected to grow at 3–4% annually by 2019, driven by economic growth in key markets, especially the US and China and India.
   • The Chinese market is expected to grow more slowly from 2017 onward due to economic slowdown, but India is forecasted to see steady growth.
   • New mines and increased exploration may lead to higher supply, but existing mines are aging, causing a decline of 1–2% annually in rough-diamond supply from 2015 onward.
   • The gap between supply and demand is expected to widen starting 2019, as demand growth outpaces supply.

5. Consolidation and Adaptation

   • Industry players are expected to focus on consolidation, improving operational efficiency, and transitioning to sustainable business models.
   • Enhanced transparency and standardization (e.g., introducing price indexes) are being adopted to address issues in diamond financing.

Conclusion
The diamond industry is navigating short-term challenges stemming from market inventory, economic uncertainty, and shifting consumer preferences. However, consolidation and adaptation offer pathways toward recovery, and the global outlook remains positive due to long-term demand factors, especially in key regions like the US, India, and China.