Pandemic Year Underscored Antwerp Diamond Industry Resilience
Kicking in an open door, 2020 was a year none of us will easily forget. And while on the one hand, the pandemic is not out of the picture yet, on the other hand, there is a feeling that the year only really started around summer. That is the moment when, at least in Antwerp, the initial shock of global lockdowns subsided somewhat, and the industry adapted to the new normal says Karen Rentmeesters, Senior Manager PR & Communications at the Antwerp World Diamond Centre (AWDC), the organization representing over 1400 registered diamond companies and diamond stakeholders such as miners, shipping companies and tender houses who operate from the heart of the global diamond trade, Antwerp, Belgium.
“It is not the first crisis Antwerp has experienced in its nearly 575 years of diamond history. We have learned to reinvent ourselves time and again, and that is exactly what happened in the past months. The Antwerp Diamond Office, the pinnacle of the rough and polished trade, remained open throughout the pandemic and Antwerp’s unique infrastructure enabled diamond companies and tender houses to quickly restart in safe conditions. Together with the shipping companies we sought and found solutions to overcome logistical hurdles and overall, the discipline our community demonstrated to adhere to COVID-restrictions and keep the business going at the same time proved to be a major advantage for Antwerp over its competitors, who clearly struggled to get organized.”
Overall, Rentmeesters says, thanks to Antwerp’s resilience and adaptability, in terms of volume the diamond hub managed to come as close as 85% of the total volume of traded goods in 2019, and in terms of value, to 67%, or a total of 164,4 million carats and US$24,9bn. “That is a remarkable result considering that the world virtually stood still three quarters of the year, with no B2B trade shows that traditionally constitute important selling moments for polished goods, retailers who had to close shop for weeks on end, and other trade and manufacturing centers which were forced to shut down completely for several months.”
Antwerp’s center of gravity is beyond any doubt the trade in rough diamonds, and the pandemic revealed just how dominant the city is as the world’s primary rough market, Rentmeesters says. “The trade in rough diamonds, especially what we call “run-of-mine” productions, diamonds that come straight from the mine, are the lifeblood of the industry. Antwerp is the only place in the world where you can find these original goods, and equally important, the critical mass of buyers and sellers to sell these diamonds, generating the best market value. Throughout the past months, we have amply shown that this is not a marketing gimmick but a reality and a tangible added value for diamond producers. We worked hard to keep the engines running and that clearly paid off”.
According to AWDC data, despite travel restrictions, Antwerp hosted nearly a 100 rough diamond tenders in 2020, selling over 10.5 million carats of rough run-of-mine goods, through the tender houses that operate in the city, while other trade hubs scaled back on tenders, offering predominantly secondary market goods. The system of tenders, where rough diamonds are offered for sale in an auction-type setup to a much broader public of accredited buyers, has become an increasingly popular sales channel alongside the traditional long-term sales contracts between miners and the midstream traders and diamond manufacturers.
The pandemic undoubtedly had an impact on business in the industry’s main trading hubs; In terms of volume, Antwerp’s rough imports fell only about 1% compared to 2019, while in other hubs, these rough imports dropped well in the double digits. But rough prices strengthened in the final months of 2020, returning to pre-pandemic levels, indicating solid market demand and by the end of the year, long-term contract sales by also rebounded strongly, a trend that is continued in the first months of 2021.
Emerging from the Crisis Not Unscathed but Stronger
Evidently the impact of the pandemic is also felt across the diamond pipeline, from miners to retail, but AWDC and Bain and Company’s 10th Global Diamond Report, entitled “Brilliant Under Pressure”, echoes the Antwerp sentiment. One of the key findings is that the diamond industry suffered, but fared better than the personal luxury market overall, with revenues decreasing by 15% to 33%. Industry experts are in consensus that overall, the midstream is emerging from the crisis stronger, with healthier inventory levels and financial deleveraging. Karen Rentmeesters; “The fact that we see a 5% increase in new companies that have established themselves as a registered diamond company in 2020, and only a handful of companies were forced out of business, bears testimony to the inherent robustness and health of Antwerp’s diamond companies and our hub as a whole.”
Across the board, polished trade contracted more than the rough trade, with double digit declines in polished exports in all the industry’s major hubs, which doesn’t come as a surprise considering lockdowns, travel restrictions and economic uncertainty
resulted in lower diamond jewelry sales. However, a near-full recovery in Q4 2020 of polished prices to January levels, and strong demand and (holiday) sales that continue in the first months of the new year provide sufficient reasons to be cautiously optimistic. The Global Diamond Report findings on consumer sentiment support that trend; consumers value diamond jewelry and have a strong emotional link with the product as such. Diamond jewelry, the report states, already performed
better than the personal luxury market in 2020.
Future-Proofing the Industry
The report further identifies two key trends for the future that are shaping the diamond industry and were accelerated by the Covid-19 crisis; the increasingly phygital nature of the value chain, where online and offline each have their relevance, and an increased focus and awareness on sustainability and transparency.
“Necessity is the mother of all inventions, as the proverb goes, and we strongly support all kinds of innovation in the diamond industry, from digital sales and services platforms, tools to enhance transparency, compliance and sustainability, but also alternative go-to-market strategies and marketing partnerships. The Antwerp diamond industry eco-system has once again proven to be built on a solid foundation, with a focus on long-term stability through sustainable and transparent business practices and a healthy dose of agility to adapt to challenges. Those are the ingredients that make Antwerp a reliable, trusted and stable hub.”
The Global Diamond Report concludes that despite the lingering economic uncertainty, the long-term outlook for the diamond industry remains positive, spurred by the encouraging (interim) results of the past four months. Rough supply is expected to remain largely flat (-2% to 2% annually) while demand for rough, once recovered, will grow at 1% tot 3% annually. Global demand for diamonds will be on par with GDP and disposable income trends of high-net-worth individuals, and a strong focus on lower-tier cities in emerging economies. Gen-Z customers can accelerate both growth and structural changes in the industry through their purchasing preferences and sustainability agenda.