Recently BCG in collaboration with De Beers Group suggested the drivers of the natural diamond industry differ in the short and long term. The short-term outlook is driven by, among other factors, stock levels in the midstream value chain segments and retail propensity to restock before and after key selling periods.

The long-term outlook (the focus of this report) is driven by supply and demand fundamentals. While demand conditions may remain uncertain in the short term, a more positive long term industry outlook is supported by constrained primary supply, rising global affordability underpinning demand growth, and industry initiatives (for example, effective marketing and retailer collaborations) to reinforce the desirability of natural diamonds.

This submission looks at these fundamental drivers in turn, aiming to bring greater transparency to the complex set of factors affecting the natural diamond industry. Primary supply of natural diamonds is expected to decline by approximately 1% CAGR over the next ten years.

Future production increases are unlikely to offset decreasing volumes from mines reaching the end of their productive life. Suppressed exploration budgets over the past decade, a scarcity of large new discoveries, and lengthy mine development timelines make it difficult to foresee significant new volume increases, although there is some potential for brownfield expansion of cyclically viable supply if prices rise.

Artisanal mining volumes are a relatively small share of supply volume. Beyond primary supply, recycled diamonds are expected to have limited supply impact in the next decade, contributing less than 10% of the supply of natural polished diamonds.

This overall constrained supply outlook provides positive stability for the natural diamond industry. Long-term demand for natural diamonds is driven by affordability and the desirability of diamonds relative to other jewelry, discretionary goods, or experiences.

In the coming years, the continuing growth of global real GDP, wealth, and Personal Disposable Income (PDI) is expected to drive overall affordability. Comparatively, desirability faces greater uncertainty over the coming decade, with three main dynamics shaping natural diamond demand,

1: The continuing rise of brands, which is driving growth in diamond jewelry and capturing a larger share of value in diamond jewelry sales.

2: LGD demand, including the timing and degree to which LGD adoption will peak within these ten years.

3: The relative desirability of diamonds versus gold, other gemstones, and alternative discretionary spending (including experiences) among the growing middle class in Asia.