The Coronavirus pandemic affected several businesses around the world because of the restrictions and other measures that had to be taken. The diamond business was also not exempted from these negative effects.
In dealing with the pandemic, lockdown measures had to be taken in countries worldwide. This translated to restricted movements and border closures and this had significant consequences not only on diamond mining and production but on the supply chain as well; the industry took a hard hit.
Imports and exports were brought to a stop almost completely as a result of border closures, artisans tasked with cutting and polishing of rough diamonds were confined to their homes, sale stores were closed and miners, although still working as the mining industry was an essential sector, had to be subjected to social distancing rules as well as necessary serious hygienic measures.
Effects on the Industry
With the spread of the virus, it would only make sense that the fight was survival was paramount so there would be a fall in the demand for luxury items. De Beer for example which happens to be the world’s second-largest producer, reported in March 2020 a decline in sales from $496m in 2019 to $355m during its second sales cycle of 2020 (there are 12 sales cycles in a year) translating to a 28% year-on-year decline. With the lockdown measures in place, despite the effect it had on the market, De Beer refused to cut down prices in a bid to control their stock levels, but they reduced production, as a result, the diamonds kept piling up, all these to protect the market and to protect value as well.
India which is known to have the most concentration of polished diamonds witnessed imports of rough diamonds dipped to $1 million in April from $1.5 billion in February. Exports of polished diamonds also had a downward spike by 26% year-on-year (it went from $2.18 bn in August 2018 to $1.64 bn in August 2020).
According to reports from RapNet Diamond Index (RAPI) which serves as the benchmark of diamond prices for the industry, the price of one-carat diamonds was down 9.7% in the first quarter of 2020 and down 13.1% year on year, the price of 0.50-carat diamonds also experience downward movement to the tune of 4.9% in the first quarter of 2020 and down 9.5% year on year.
Operations in artisanal, small scale, and large-scale mining in African countries were affected, with artisanal and small-scale mining witnessing the worst hits; as of April 2020, exports halted almost totally in Guinea with diamond exports falling drastically to 39,494 carats in the first quarter of 2020 from about 270,000 carats in the first quarter of 2019. Cameroon also had not exported any diamonds at that time since the lockdown began.
With all these happening, it was no surprise to find exploitative and opportunistic buyers who taking advantage of the situation and buying at ridiculously reduced prices, take Zimbabwe, for example, diamonds that were bought at SSL 5,000,000 per carat [ca. USD 515] before the pandemic were bought at SSL 2,500,000 per carat indicating a 50% drop in price. It was noted that regular buyers no longer had the money to buy so miners became desperate and they had no choice but to sell to these new, criminal players at half the price. Of course, it would only follow that these exploitative buyers were stocking up the diamonds with plans to sell them at much higher rates the moment restrictions on trade were lifted.
With the drastic reduction in profitability as well as strict work restrictions, many of these artisanal miners had to abandon mining in search of better work opportunities in other sectors such as agriculture.
The Way Forward
With the shortcomings experienced with on-ground sales, the next best thing would be moving sales online as is the case with other sectors. The lockdown as it appears has affected people generally as there’s been a need to place greater value on emotional bonds and relationships ever before. It, therefore, poses an opportunity to latch unto these emotional connections using them as a focus and as a means of marketing the desirability of diamonds, taking advantage of online sales, thereby providing employment opportunities.
As pandemic restrictions have begun to be relaxed in several places all around the world, every party involved in the supply chain are focusing on innovative ways to fix areas that have been shown to lack or that have been crippled in the months leading to the post-lockdown er such as the artisanal and small-scale diamond sector, as well as remove avenues for exploitative and criminal trade. Manufacturing has resumed in places such as India by 50% and commerce has also resumed in places such as China and Belgium. It has been a smooth sail so far for retailers that have been able to adapt to online trading.