How Covid-19 Changed the Diamond Pipeline and What Lies Ahead

In a new article titled “The 2019 Pipeline – Prelude to the Storm”, Chaim Even Zohar and Ranay Narvekar analyze how the 2019-2020 period has evolved into “a dramatic game changer for the entire world”; the implications the Covid-19 global pandemic had on demand and supply of rough and polished diamonds; and what lies ahead as we rush into a new year.

In the exhaustive report, Even Zohar and Narvekar discuss how the diamond industry started a gradual process of pipeline restructuring in 2019 which “finally matured into an inevitable and, in fact, a most desirable conclusion […]” for the midstream sector (manufacturers of the rough and the traders of the polished diamonds). In 2019, De Beers and Alrosa were already faced “with considerable resistance to purchase their rough allocation” and therefore introduced “unprecedented flexibility in the way it sold its diamonds”. In February 2020, both producers changed their sales (or “sights”) systems.

In this way, the writers claim, “the diamond pipeline has for the first time in almost hundred years become truly demand driven – at each and every level of the pipeline. It has become a normal competitive industry not any more driven by the rough supply side”.

In the long term, Even Zohar  and Narvekar say, the diamond industry “will become structurally not only more competitive, but also much healthier” as each pipeline level becomes “a price taker” – a market participant that is not able to dictate the prices in a market and must accept the prevailing market price”.

Looking Ahead

The rest of the article is dedicated to an in-depth looks at how the spread of Covid-19 –local and national lockdowns, business restrictions, store closures, etc. – has affected and will probably go on affecting the diamond pipeline, including consumer demand for luxury items such as diamonds and diamond jewellery.

Looking ahead, Even Zohar and Narvekar claim, “2021 promises a much brighter outlook” than 2019 and 2020. They estimate that “both polished sales and the rough demand will be higher than 2019, even with conservative growth in demand growth, and possibly at a level between 2018 and 2019”.