2024天然钻石业的未来研究报告

TheFutureoftheNaturalDiamondIndustry

May2024

incollaborationwithDeBeersGroup

Contents

0

1

ExecutiveSummary

0

2

Introduction

•

TheNaturalDiamondValueChain

0

5

Long-TermFundamentalDrivers

ImpactingtheDiamondIndustry

•

SupplyDrivers

○

PrimaryProduction

○

SecondarySupply

•

ValueChainandStockLevels

•

DemandDrivers

•

ThreeDynamicsInfluencingDiamond

DemandGrowth

○

TheContinuingRiseofBrands

○

Lab-GrownDiamonds

○

DesirabilityAmongtheGrowing

MiddleClassinAsia

•

TheImpactofRecycling

•

TheFutureofDemand

2

5

FutureOutlookfortheDiamond

Industry

•

Long-TermOutlook

•

StressTestingtheOutlook:Beyondthe

MostLikelyCorridor

○

DownsidestotheMostLikely

IndustryOutlook

○

UpsidestotheMostLikelyIndustry

Outlook

2

8

FinalReflections

ExecutiveSummary

Thenaturaldiamondindustrynavigatedachallenging2023.

Demandwasimpactedbythebridalcatch-upeffectafterCOVID-19restrictionseased,macroeconomicheadwinds,andincreasing

demandforlab-growndiamonds(LGDs),particularlyintheUS.Inaddition,short-termsupplywasaffectedbychangesinmidstreamanddownstreamstocklevels.Thisresultedinaweakeningofthevalueofroughnaturaldiamonds.

drivenby,amongotherfactors,stocklevelsinthe

T

hedriversofthenaturaldiamondindustrydifferintheshortandlongterm.Theshort-termoutlookis

midstreamvaluechainsegmentsandretailpropensitytorestockbeforeandafterkeysellingperiods.Thelong-termoutlook(thefocusofthisreport)isdrivenbysupplyand

demandfundamentals.Whiledemandconditionsmay

remainuncertainintheshortterm,amorepositivelong-termindustryoutlookissupportedbyconstrainedprimarysupply,risingglobalaffordabilityunderpinningdemand

growth,andindustryinitiatives(forexample,effective

marketingandretailercollaborations)toreinforcethe

desirabilityofnaturaldiamonds.Thisreportlooksatthesefundamentaldriversinturn,aimingtobringgreatertrans-parencytothecomplexsetoffactorsaffectingthenaturaldiamondindustry.

Primarysupplyofnaturaldiamondsisexpectedtodeclinebyapproximately1%CAGRoverthenexttenyears.Futureproductionincreasesareunlikelytooffsetdecreasingvol-

umesfromminesreachingtheendoftheirproductivelife.Suppressedexplorationbudgetsoverthepastdecade,a

scarcityoflargenewdiscoveries,andlengthyminedevelop-menttimelinesmakeitdifficulttoforeseesignificantnew

volumeincreases,althoughthereissomepotentialfor

brownfieldexpansionofcyclicallyviablesupplyifpricesrise.Artisanalminingvolumesarearelativelysmallshareof

supplyvolume.Beyondprimarysupply,recycleddiamondsareexpectedtohavelimitedsupplyimpactinthenext

decade,contributinglessthan10%ofthesupplyofnaturalpolisheddiamonds.Thisoverallconstrainedsupplyoutlookprovidespositivestabilityforthenaturaldiamondindustry.

Long-termdemandfornaturaldiamondsisdrivenbyaf-

fordabilityandthedesirabilityofdiamondsrelativeto

otherjewelry,discretionarygoods,orexperiences.Inthecomingyears,thecontinuinggrowthofglobalrealGDP,

wealth,andpersonaldisposableincome(PDI)isexpectedtodriveoverallaffordability.Comparatively,desirability

facesgreateruncertaintyoverthecomingdecade,with

threemaindynamicsshapingnaturaldiamonddemand:

•Thecontinuingriseofbrands,whichisdrivinggrowthindiamondjewelryandcapturingalargershareofvalueindiamondjewelrysales

•LGDdemand,includingthetiminganddegreetowhichLGDadoptionwillpeakwithinthesetenyears

•Therelativedesirabilityofdiamondsversusgold,oth-

ergemstones,andalternativediscretionaryspending

(includingexperiences)amongthegrowingmiddleclassinAsia

Arangeofdemandscenariosispossibleacrossthesedynam-ics.Takentogether,alikelyoutlookseesannualdemand

growthoveraten-yearperiodintherangeof2%to4%CAGR.ThisoutlookreflectsgrowingGDPandPDI;sustainedunder-lyingdemandintheUS;eventualdifferentiationbetween

naturaldiamondsandLGDsasLGDpricesandretailermar-ginsfall;amoremoderateoutlookforChina;andtherealiza-tionofstronggrowthinIndia.

Giventheinstabilityofthepastfiveyears—whichhave

seenincreaseddemandforLGDs,thepandemic,thecatch-upeffectafterCOVIDrestrictionseased,andachallenging2023—understandingtheindustryoutlookrequiresa

fundamentalsapproach:thelikelyoutlookonmanyfactorsisnotnecessarilyacontinuationofmomentum.Thisalsomeansthenaturaldiamondindustrycannotstayidle.A

positivedemandoutlookisalsodrivenbyseveralindustryinitiatives.Theseincludeeffectivemarketingtosupport

categoryandindustrycollaborationsthatreinforcethe

desirabilityofnaturaldiamondsamongUSconsumers.

TheyalsoincludecontinuedeffortstobuilddesirabilityinAsia.

Wehopeyoufindthereportinstructiveinunderstandingthelong-termnaturaldiamondindustryoutlook,particularlyatthisdynamicmomentintime.

THEFUTUREOFTHENATURALDIAMONDINDUSTRY1

Introduction

TheNaturalDiamondValueChain

hediamondvaluechainstartswiththephysicalex-

Tciiln,i,buti,eools,--

finallyretailing.

(SeeExhibit1.)

Allsegmentscreatevalueand,intheaggregate,informdiamondjewelry’sretailvalue.Thevaluechainisglobalized,withdifferentstagesconcen-tratedinspecificregionsorcountries.

Upstream.Theupstreamstepsofthevaluechainincludetheexplorationandminingofroughdiamonds.Thelargestdiamond-producingcountriesincludeRussia,Botswana,

Angola,Canada,SouthAfrica,andtheDemocraticRepub-licofCongo.

1

Diamondminingcanrangefromsimple

small-scalenoncommercialartisanalminingtosophisticat-edlarge-scalecommercialoperations.Thetwolargest

roughdiamondproducersaccountforapproximately60%ofsupplybyvalue

.1

Smallerproducerscomprisethere-mainingshareofproduction.

1.KimberleyProcess;DeBeersGroup;BCGanalysis,2024.

2THEFUTUREOFTHENATURALDIAMONDINDUSTRY

THEFUTUREOFTHENATURALDIAMONDINDUSTRY3

Exhibit1-TheNaturalDamondValueChainIncludesExtraction,Cutting,Polishing,andRetailing

.Upstream.

.Midstream.

.Downstream.

Jewelry

Designand

Manufacturing

Sorting,

Valuation,andTrading

Cutting,

Polishing,

andTrading

ExplorationandProjects

JewelryRetail

Mining

Explorationfordeposits

Description

Numberofplayers

responsiblefor70%ofrevenue

Barrierstoentry

Sortbyquality

andvaluationSelltotradersandpolishers

ProcessroughtoproducepolishedValueadded,

termed“RtoP”

Combinewithothergoodstocreatejewelrypieces

SelltoconsumersSomeretailers

fullyintegrated

fromcuttingstep

>100

>5,000

(~90%inindia)

>10,000>100,000

Medium

MediumLow

Mineand

processroughdiamonds

5

High

Rough

Polished

Jewelry

Sources:BCGanalysis;expertinterviews.

Therearefourmethodsforminingdiamonds,including

open-pit,underground,marine,andalluvial.Open-pitmin-ingisthemostcommonmethod.However,manyopen-pitresourcesarebecomingdepleted,andsurfacediamond

resourcesarenowbecomingscarcer.Asaresult,mining

companiesarelookingtomorecostlyundergroundminingforfutureexpansion.

Midstream.Onceroughdiamondsareextracted,therearetworoundsofsorting.First,theyaresortedbyindustrial

andnonindustrialgrade,usuallyonsiteatthemine.Thentheyaretransportedtoanotherlocationandsortedbasedonvariouscharacteristicssuchassize,color,andquality.Thissortingiscrucialfordeterminingtheirpotentialvalueandthemostsuitabledistributionchannel.Thesorting

centersofthebiggestproducersaretypicallylocatedinregionsofminingoperationsorclosetocustomers;for

example,inBotswana,India,Israel,theUS,Belgium,andDubai.

Next,thesortedroughdiamondsarecutandpolishedintoafinishedgemtoenhancetheirappearanceandvalue.

Thisprocessrequiresskilledartisansandislabor-intensive,whichaddstothefinalwholesalevalueofapolisheddia-

mond.Moreover,asignificantportionoftheroughdia-

mondislostduringthisstage—onaverage,50%to60%ofitsinitialweight

.2

Indiaistheworld’slargestcenterforcuttingandpolishing

roughdiamonds,particularlyforsmallandmedium-sized

diamonds.Itaccountsfor90%(volume)ofpolisheddiamondmanufacturingglobally.

3

2.EssiluxGroup:KnowledgeBase,2024.

3.TheGemandJewelryExportPromotionCouncil,“India’sTimetoShineintheGlobalGoldTrade,”2021.

4THEFUTUREOFTHENATURALDIAMONDINDUSTRY

Cuttersandpolisherstypicallypayupfrontforroughinvento-ries,oftenrelyingondebtfinancingtofundpurchases.Fund-ingwashistoricallysuppliedbyinternationalbanksbuthas

increasinglyshiftedtoIndia,consistentwiththegrowthofthemidstreamindustrythere.Conversely,businessesoftensell

polishedgoodsoncredit,usuallyofferingtermsof30to60days.

4

Proficientinventorymanagementisthuscriticalforsustainingfinancialviability.

Cutandpolisheddiamondsarethensetintojewelry,whichaccountsforalmostalldiamonddemandinvalue.The

remainingdiamondsareusedforindustrialapplications

.5

Thisstageinvolvesdesignandcraftsmanshiptocreate

finishedproducts.Manufacturingtakesplaceinawide

rangeoflocations,fromspecializedhubstolocaljewelers.Jewelrymanufacturersdonotnormallyowntheirown

inventoryofdiamondsbutratherworkwitheithercut-ter-polisher-orretailer-ownedstones.

4.Rapaport,“FromCrisistoCrisis,”2021.

5.UBS,“Diamond101,”2023.

6.DeBeersGroup,2024.

7.DeBeersGroup,Indiaconsumerstudy,2019.

Downstream.Thefinalstageofthevaluechaininvolves

thesaleofdiamondjewelrytoconsumers.Thesalepriceistypicallyinformedbythepolisheddiamondwholesaleprice,thecostofadditionalnon-diamondcontent(suchaspre-

ciousmetalsorothergemstones),retaileroperatingcosts,

andretailermargin.Retailersrangefromhigh-endbrandstoonlineplatforms.Inventorylevelsrequiredtofulfillretail

ordershavedecreasedoverthepasttenyearsasretailershavebecomemoreefficientatstockmanagement,inaddi-tiontoanincreaseintheshareofonlinesales.

ThemajordownstreamconsumermarketsfordiamondsaretheUS,China,andIndia,withtheGulfStatesandJapan

makingupthelargestfivemarkets.In2023,theUSaccount-edformorethan50%ofnaturaldiamondpolishedwhole-

saledemandglobally,followedbyChinaandIndiawitha

combined25%shareofglobalpolishedwholesaledemand

.6

Europe’stopfourmarkets—theUK,Germany,Italy,and

France—accountfor8%oftotaldemand-basedonsalestoconsumersresidentineachcountry.Globally,regionsvarystronglyinmaturityanddemandlandscape.TheUSis

mature,withhighownershipandlargerdiamondsizes.

AlthoughChinaandIndiahaveahighershareofsmaller

diamondsizes,consumersdemandhigherclarityandcolor.InIndia,forexample,morethan85%ofpolishedwholesaledemandhashistoricallybeenforhigh-claritystones

.7

THEFUTUREOFTHENATURALDIAMONDINDUSTRY5

Long-TermFundamentalDriversImpactingtheDiamondIndustry

short-termoutlookisinfluencedbymidstreamstocklevelsandmidstreamriskperception,aswellasthepro-

T

heoutlookforthediamondindustryisinfluencedbyavarietyoffactorsanddiffersbytimehorizon.The

pensityofretailerstorestockbeforeandafterkeysales

periods.Incontrast,thelong-termoutlookisdrivenbythelong-runequilibriumofsupplyanddemand,whichisbasedonconsumerdemandandexpectedreturnonsupply

investments.Thisreportfocusesonthesupplyandde-mandfundamentalsthatimpactthelong-termoutlook.

SupplyDrivers

Understandingsupplyinthediamondindustryrequiresa

broaderperspectivethanproductionalone.Itisessentialto

considertheentiresupplychain,recognizingthatinventory

decisionsatvariousstagesinfluencethefinalsupplyavailabletothedownstream,particularlyintheshorterterm.

6THEFUTUREOFTHENATURALDIAMONDINDUSTRY

Diamondsupplyispredominatelymadeupofnewlyminedstones,referredtoasthe“primarysupply.”Somesecond-

arysupplycomesfromexistingstonesreenteringthevaluechainthroughdiamondrecycling.

Primarysupplyisdeterminedbytheunderlyingresource

attributesandlifespanofthekeydiamond-producingmin-ingdeposits.Itisalsoaffectedbyminingcompanies’deci-

sionsaboutextendingthelifespanofminesandinvestinginnew(greenfield)orexisting(brownfield)projects,aswellasinnewtechnologiesthatimproveminingefficiency.

Secondarysupplyisfrompre-ownedpolisheddiamonds,

oftenreferredtoas“recycleddiamonds.”Whilethemajori-tyofrecycledjewelrypiecesareresold“intact,”insome

casessetdiamondscanberemovedandreenterthedia-mondvaluechain,tobe“soldasnew”infreshlycraftedjewelry.Inthiscase,diamondsareusedeitherintheir

originalstateorafterbeingrepolishedorrecut.These

augmentthenaturalpolisheddiamondsupplybutrepre-sentasmallpercentageofthetotalsupply.

PrimaryProduction

Long-Termdecliningproduction

Thelargesttwodiamondproducers,DeBeersandAlrosa,accountforroughlyhalfoftheprimarysupplyintermsof

volume.In2023,theycontributed25%and27%,respective-ly,oftheapproximately130millioncarats(Mct)volume

globally.

8

Intermsofvalue,DeBeersGroupholdsalargershareat33%,comparedtoAlrosa’s25%

8

,attributabletoitsgreaterrelativeproductionoflarger-caratandhigher-qualitydiamonds.Theremainingshareofsupplyisfragmented

acrossseveralsmallerproducersandartisanalmines.

Acrossthisindustrylandscape,annualsupplyvolumehasfallensince2006,whenproductionpeakedaround160Mct.Productionexceeded150Mctagainin2017,butfellto129Mctin2023.Annualglobalproductionisanticipatedtofalltobetween110Mctto120Mctby2033,

9

asfutureproduc-tionincreasesareunlikelytooffsetthedecreasingvolumesfromminesreachingtheendoftheirproductivelife.

(See

Exhibit2.)

Catoca’sLueleprojectinAngola,opened2023andforecastedtoyieldaround628Mctover60years,is

theonlymajornewmineenteringintocommercialproduc-tionthisdecade

.10

Thesupplyofdiamondstakesplaceonaglobalbasis,withtheprovenancebecomingmoreimportant.Immediately

followingRussia’sinvasionofUkraine,theUSbanned

importsofallsizesofdiamondsthatcamedirectlyfrom

Russia.In2024,theG7countriesareimplementingnew

sanctionsinphases,bysizeofdiamond,fromJanuary

throughSeptember.ThesanctionsareexpectedtocoverallRussiandiamondsanddiamondjewelry,bothdirectlyandindirectlyimported,ofgreaterthan0.5carats

.11

Inaddition,globalbrandsalsoself-imposedtheirownbansonboththedirectandindirectsupplyofallsizesofRussiandiamonds.Theseactionsbanningdirectandindirectsupplyareex-

pectedtohaveagreaterimpactthantheinitialdirectbans.

Newgreenfieldsitesareunlikelytocontributeanysignifi-

cantupsidetothecurrentten-yearsupplyforecast.Mine

explorationbudgetsareheavilysuppressedandhavefallento20%of2007levels:

12

approximately$200millionin2023versusapproximately$1billionin2007.Inaddition,lengthymine-developmenttimelineswillpreventsignificantvolumeincreasesoverthenexttenyears,evenifdiamondvalues

increase.Forexample,theLueleminewasdiscoveredin2013butproductiondidnotstartuntil2023.

Despitethislong-termoutlookforgreenfieldsites,supplyelasticityfromexistingminesbasedonprevailingdia-

monddemandispossible.Cyclicalsupplyfrommines

higherupthediamondcostcurveismoresensitiveto

fluctuationsindemand.Periodsofdepresseddemand

oftenresultinsupplypauses(sometimespermanently)

fromsuchmines.Conversely,positivedemandconditionsincreasethefinancialviability,resultingin(re)openingorlife-extensionprojects.

8.DeBeersGroup;BCGanalysis,2024.

9.KimberleyProcess;BCGanalysis,2024.

10.Reuters,“Angola’sNewDiamondMineOpensAgainstBackdropofWeakDemand,”2023.

11.USTreasury;EuropeanCommision,2023.

12.S&PCapitalIQ,2024.

THEFUTUREOFTHENATURALDIAMONDINDUSTRY7

Exhibit2-ModestDeclineinPrimarySupplyofNaturalDiamondsExpectedovertheNextTenYears

Globalroughdiamondproductionvolume(Mcts)

200

150

100

50

0

-1%

20142015201620172018201920202021202220232024202520262027202820292030203120322033

Forecast

Historical

DeBeersGroupAlrosa

RioTintoDRC

AngolaOther

Newmines

Lifeextentions

Existingmines

Sources:KimberleyProcess;DeBeersGroup;BCGanalysis.

Note:Mct=millioncarats.

Forthisreason,thecurrentlydepresseddemandenviron-

menthasputdownwardpressureonsupply.Moreminesaresuspendingproductionorshutdownearlierthanexpected(forexample,DeBeers’sSnapLakeminepausedproductionin2015andbeganactiveclosurein2022

13

).Acontinued

negativepriceoutlookcoulddriveadditionaldeclinesin

supplyasmoreprojectsfacedelaysorarediscontinuedduetolowfinancialviability.

Conversely,apotentialsustainedpositivepriceoutlook

couldpromotesomecyclicalsupplywithhigheroperation-alcapabilitytobemaintained.Thiscouldpotentiallyre-

sultinginanoverallflattersupplyforecast.

SecondarySupply

RecycledDiamondsMaintainaSmallShareofVolume

Recycleddiamondshavealwayscontributedtothenaturalpolisheddiamondvaluechain,albeitatalowlevelrelativetotheprimarypolishedsupply.Recyclingbeginswhen

diamondjewelryownerssellortradeintheiritemsfor

variousreasons,suchasnotwantinginheritedpieces,achangeinpreferences,orfinancialnecessity.Thejewelrycanthenbedirectlyresoldaspre-ownedvintagepieces(especiallyifitisbranded)inthesecondhandsector,by-passingtheupstreamandmidstreamnaturaldiamondvaluechain.Alternatively,themetalinthejewelrycanbemelteddownandthediamonds“soldasnew”infreshlycraftedjewelry,eitherintheiroriginalstateorafterbeingrepolishedorrecut.Thisaugmentsthenaturaldiamondsupply(butrepresentsonlyasmallpercentageoftotal

supply).

(SeeExhibit3.)

13.DeBeersGroup,“VictorandSnapLakeMinesEnterFinalStagesofClosure,”2023.

8THEFUTUREOFTHENATURALDIAMONDINDUSTRY

Exhibit3-Pre-ownedDiamondJewelryCanReentertheValueChaininaVarietyofWays

Diamond

Jewelrypiece

Soldor

tradedin

Re-entryintodiamondsupplychain

Recutandpolished

Newjewelry,

withrecycled"as

new"stone

Pre-owned

diamond

jewelry

Diamond

separatedfromframematerial

Newjewelry,

withrecycled"as

new"stone

Vintagejewelry

(pieceremains

intact)

Reasonstosell

Left

intact

•Inheritance

•Financialneed

•Changeofpreference

•Divorce

•Other

Source:BCGanalysis.

Non-inheritance-relateddiamondrecycling,typicallystem-mingfromchangesinpreferenceorlifeeventssuchas

divorceorfinancialnecessity,isestimatedtoaccountfor

approximately80%ofrecycleddiamondvolumetoday.

Giventhatnosignificantchangesinthesaleandpurchaseratesofuseddiamondjewelryareanticipated,these

non-inheritancerecyclingdriversarelikelytopersistand

continuetofluctuatewiththepriceofdiamonds,albeit

withalimitedincrementalimpactonthelong-termsupplydevelopmentthroughto2033.Inheritance,ontheother

hand,willgrowastheinitialgenerationswhoowneddia-

mondsage.Forinstance,inJapan,individualsoverage60possessmorethanhalfofthecountry’sdiamonds;intheUS,thefirstgenerationofdiamondengagementrings

(DER)atscale(thegenerationwhere>50%bridesreceivedDER)couldbeinheritedinthenext20years,drivingan

increaseintheinheritance-basedrecyclingvolume.

1

4

Yet,theproportionofdiamondsremovedfromrecycled

jewelryandsold“asnew”hassteadilydeclinedinrecent

years(comparedtorecycledpiecesbeingsold“asis”),fromapproximately60%ofthetotalrecycledjewelryPWPvaluein2015toapproximately30%in2021.

Thistrendisexpectedtoextendintothefuture,albeitataslowingpace,thuslimitingtheshareimpactingthedia-

mondsupplychain.

(SeeExhibit4.)

Theincreasedfocusonvintagepiecesisdrivenbybuyersandsellersalike.Sellerscanoftencapturemorevaluefromvintagejewelrythan

removedstones.Reintroducingdiamondsintothevalue

chainreducestheirvalueby30%to40%,

1

5owingtocostsassociatedwiththedealermargin,meltingandlogistics,

testingandprovingauthenticity,andrecuttingorpolishing.Oncethestonesenterthemarket,theymustcompeteonpricewithnewlymineddiamonds.Inaddition,unlikewithgold,thereisnowaytotraderecycledstonesandalackoftransparencyonthepriceofrecycledstones.Buyers,on

theotherhand,increasinglyvaluetheuniquedesign,

affordability,andsustainabilityaspectsofferedbyvintagejewelry.Thisincreasesthevalueofvintagejewelrycom-paredtothatofpurerecycledmaterial.

Finally,thetrendissupportedbyanincreasingnumberofonlineconsumer-to-consumerplatformsthatmaketradingofsecondhandvintagejewelrysimpler.Thesechannelsarehighlysoughtafterbyvintagejewelryshoppers.

14.DeBeersGroup;JapanMinistryofFinanceTradeStatistics;BCGanalysis,2024.

15.PaulZimnisky,“RecyclingCouldSavetheNaturalIndustry,”2019.

THEFUTUREOFTHENATURALDIAMONDINDUSTRY9

Exhibit4-ShareofVintageSalesoutofAllRecycledDiamondPiecesForecasttoIncrease

26%

32%

74%

68%

Outofallrecycleddiamondpieces:

~30%ofsoldpiecesareaddedbackintothesupplychain"asnew,"

removedfromtheircurrentsetting

Sharetrendingdown

~70%ofsoldpiecesareresoldonusedmarketsasvintagejewelry(especiallybranded)orstand-alonestones

Sharetrendingup

20232033

DiamondssoldasusedvintagediamondjewelryDiamondssold“asnew"

Sources:DeBeers;BCGanalysis.

Overall,theimpactofrecycleddiamondsonsupplyintermsofPWPvalueisexpectedtoremainstable,contributinglessthan10%ofthesupplyofnaturalpolisheddiamonds.TotalrecycleddiamondvolumeisforecastedtogrowataCAGRofapproximately2%throughto2033,mostlydrivenbyan

increaseininheritanceacrossmaturemarkets,aswellasanoveralllargerglobal“installedbase”ofdiamondstofeed

recyclinggoingforward.However,therewillbeadecreasingshareofdiamondsremovedfromtheirsettingsandreenter-ingthevaluechaincomparedtopiecesresoldonused

marketsasvintagejewelry.Thisdynamicisreflectedinthesupplyforecastinthisreport.

ValueChainandStockLevels

StableMidstreaminventoriesexpectedtoremain,whileefficiencyreducesDownstreaminventory

Naturaldiamondinventoriesareheldacrossallstagesofthediamondvaluechainatvaryinglevels.Inventoryman-agementdynamicsdirectlyinfluencediamondpriceforma-tionintheshorttermbyimpactingtheimmediatesupplyavailability.Midstreamanddownstreaminventorylevels

areparticularlyrelevantasdemandflowsupthroughthevaluechain.

10THEFUTUREOFTHENATURALDIAMONDINDUSTRY

Midstream.Intheshortterm,midstreaminventories

fluctuate,largelydrivenbyprevailingmarketconditions,

short-termviewsonthemarketoutlook,andfinancing.

Longerterm,structuralmidstreaminventorylevelsare

dictatedbytheneedtomanagestockforoperationalpur-

poses.Althoughefficiencyandscalegainsinthemidstreamhavegenerallyreducedstocklevelsfromthoseobservedintheearly2000s,leadtimesforprocessingandsalesrequirecuttersandpolisherstogenerallymaintainaminimum

inventorylevel.However,thisfloorisoccasionallybreachedinverysharpdemand-recoveryscenarios.

Downstream.Historically,retailershaveheldstructura