2020 was a year of two halves for consumer demand for diamonds. In the early part of the year, lockdowns and mobility restrictions caused steep declines in consumer demand, first in China and then in the rest of the world. The second half of the year was a period of gradual improvement.
Global demand for diamond jewelry in 2020 declined by an estimated 14 percent year-on-year to US$68bn, as a sharp drop in the first half was followed by moderating year-on-year declines in the second half of the year.
Consumer demand for diamond jewelry in the US fell by 7 percent to US$35 billion representing just over half (51 percent) of total global diamond jewelry demand. This performance was supported by the government fiscal stimulus programs and consumer desire to express emotions in a meaningful way through high quality valuable gifts.
2020 was a year of considerable swings in consumer demand for natural diamonds, as the first half saw declines due to Covid-19 lockdowns, first in China, then in the US and globally, while the second half was a period of gradual recovery for all consumer markets, but especially the US. The year ended with a positive momentum, despite the global annual decline of 14 percent in sales value compared with 2019.
The recovery picked up pace in the first half of 2021, with an estimated global diamond demand growth of about 40 percent year-on-year (or about 15-20 percent annualized growth on 2019). The outlook for the full year 2021 is positive, with expectations for a strong holiday season which is anticipated to weather the ongoing risks from the pandemic and the political and economic headwinds in different parts of the world.
The midstream of the diamond value chain was impacted by consumer demand shifts as well as supply chain disruptions during 2020. Polished diamond stocks started building up in the first half of the year as consumer demand stalled and retailers did not need to restock. For a short period, the great majority of global cutting and polishing activity came to a complete standstill as lockdowns were enforced in India due to the spread of Covid-19. Manufacturing capacities started building up in the second half of 2020 which resulted in strong demand for rough diamonds, with cutting center rough imports declining only by one percent year-on-year in H2 2020, while the full year 2020 decline was 28 percent year-on-year. Better than expected polished demand at the end of 2020 supported polished price recovery and growth.
In the first half of 2021, improving consumer demand for diamonds clashed with factory closures in India caused by a second wave of Covid-19 infections. The resulting polished diamond shortages combined with growing consumer demand supported polished price growth.
Rough diamond production and sales were disrupted in the early part of 2020 due to the impact of Covid-19 on operations. Rough diamond sales to cutting centers declined by an estimated 49 percent year-on-year in H1 2020. The reduction in rough diamond availabilities limited the impact on rough diamond prices. In H2 2020, supply to cutting centers gradually recovered and was only approximately four percent below 2019 levels. As a result, rough diamond producers destocked much of any surplus inventory that had built up earlier in the year. For the full year 2020, global rough diamond production decreased by an estimated 18 percent year-on-year in volume, while rough diamond sales to cutting centers decreased by approximately 26 percent year-on-year in US dollar terms.
The short-term outlook for rough diamond production is driven by the prospect of continued global economic recovery, with operating capacity back to pre-Covid-19 levels for most producers. However, despite the strong recovery in operating capacity, global rough diamond production is not expected to fully return to pre-Covid-19 levels, mainly due to the closure of the Argyle mine and potentially slow recovery in other production.