Are We Facing a Diamond Shortage?
Diamonds, those timeless symbols of luxury and love, have captivated hearts for centuries. But behind their beauty lies a complex industry with a delicate balance between supply and demand. Some consumers are left wondering if we are facing a diamond shortage.
This article will explore the answer to the question of how many diamonds are left and whether the diamond world is on the brink of running out. We’ll delve into the ‘how,’ ‘what,’ and ‘why’ of this situation and discuss its implications for diamond manufacturers, auction houses, and the industry.
Are We Facing a Diamond Shortage?
In recent years, there has been speculation that diamonds may be heading towards a shortage. One of the main reasons for this concern is that diamond mines are not infinite resources – eventually, they will run out.
As Gemological Institute of America research scientist Evan Smith says, “For every diamond you take out of the ground, there’s one fewer to be found.”
As rough diamond market news suggests, supply and demand heavily influence the diamond industry. On the supply side, diamonds are primarily sourced from mines in countries like South Africa, Russia, Botswana, Australia, and Canada. But as the production of some of these mines slows, rough diamonds’ availability decreases.
Notably, 2020 proved challenging for the diamond industry: production fell 22% year-over-year to a historic low of 107.3 million carats. This left many wondering if the diamond industry’s supply chain was at risk.
Factors Contributing to a Potential Diamond Shortage
Next, we will explore some factors that may lead to a lower supply of diamonds. However, we encourage you to read to the end of this article, as there is plenty of light (and sparkle!) at the end of the tunnel.
Natural Diamond Formation
Diamonds form deep in the Earth’s mantle, taking billions of years. They are then brought to the surface through volcanic eruptions or other geological processes. This natural formation process is prolonged, and new diamonds are not being created at quite the pace that can keep up with consumer demand.
Declining Production from Established Mines
Many of the world’s most significant diamond mines have operated for decades. Over time, these mines naturally produce fewer diamonds as the accessible resources are depleted. Some mines like those in South Africa, which have historically been major diamond producers, now yield fewer diamonds.
Along with producing fewer diamonds, some mines are closing altogether. One such example is the Argyle Mine in Australia, which hauled its last load in 2020. Until then, it accounted for 10% of global diamond production and was also the largest producer of natural colored diamonds in the world.
Exploration and Discovery
The discovery of new diamond deposits is becoming increasingly rare. Mining companies invest substantial resources in exploration, but finding economically viable new mines is complex and costly. This can further limit the supply of rough diamonds.
Notably, it has been about 30 years since a significant diamond deposit has been discovered. This highlights the challenges faced by the diamond industry in maintaining a steady supply of natural diamonds.
Regulations and Sanctions
Environmental and ethical concerns have led to more stringent regulations on diamond mining in some regions. This has impacted production levels in certain areas and can lead to supply chain challenges. If you ask us, more stringent regulations aren’t bad—they raise the bar for diamond companies and demand excellence from them.
Now, imagine if this suspension was extended indefinitely or made permanent. In this case, the diamond industry would face a significant hit to its supply chain and struggle to meet consumer demand.
The Impact on Diamond Manufacturers, Auction Houses, and the Industry as a Whole
Now that we have examined the reasons for the potential shortage and its implications, let’s take a closer look at how this affects diamond manufacturers, auction houses, and the whole industry.
Diamond Manufacturers
With a decrease in supply, diamond manufacturers may struggle to obtain rough diamonds at reasonable prices. This could lead to higher production costs and ultimately increase consumer prices for rough and polished diamonds.
Additionally, with sustainability becoming a growing concern, manufacturers may face pressure to adopt more ethical and eco-friendly practices – another potential cost increase.
On the other hand, manufacturers may also see an opportunity for alternative sourcing of diamonds, such as lab-grown diamonds, to meet consumer demand.
Auction Houses
Auction houses are a major player in the diamond industry, especially for high-end and rare diamonds. With a potential shortage, auctions may become more competitive as buyers try to secure their desired stones before supplies run out. This could lead to increased prices and higher profits for auction houses.
The Entire Industry
The diamond industry as a whole could undoubtedly feel the effects of a potential shortage. As prices for rough diamonds increase, the cost of production and retail prices will also rise, impacting consumers.
As previously mentioned, with pressure to adopt more sustainable diamond mining practices, concerns about the diamond industry and carbon footprint, and addressing human rights concerns, the industry may face increased scrutiny and regulations. This could also result in higher costs for businesses and potentially disrupt the traditional supply chain.
Overall, a shortage of diamonds has wide-ranging implications for the industry, from manufacturers to retailers and consumers. It may also accelerate changes in the industry, such as the rise of lab-grown diamonds as an alternative to natural stones.
As the industry navigates these challenges, it will be necessary for companies to adapt and innovate to stay competitive in a changing landscape.
What’s Next for the Diamond Industry?
As we alluded to, it isn’t all gloom and doom when it comes to diamond production. In fact, there are thought to be several untapped diamond reserves that could potentially meet the industry’s demand for years to come.
With recent advancements, tech is changing the global diamond manufacturing industry. Along with other efforts to improve sustainability and ethical practices (including the Kimberley Process), new diamond miners, mines, and key players in the diamond industry may also emerge in other parts of the world.
Rest assured, the Choron Group’s commitment to sustainability and ethical practices puts us in a solid position to weather any potential challenges in the industry. Our focus on innovation and adaptation allows us to continually provide high-quality diamonds while prioritizing social and environmental responsibility. Learn more about our approach next.
