The Covid-19 measures put in place by the government to manage and contain the spread of the virus drastically reduced the productivity in the mining industry. Both small-scale and large-scale miners, including artisans experienced the worst slowdown. In Guinea, for instance, their diamond exports plunged from 270,157 carats in the 1st quarter of 2019 to 39,494 carats in the 1st quarter of 2020. Several diamond sales events were canceled, and diamond producers were forced to reduce their prices by as much as 25 percent.
The social distancing measures and the reduction of working hours also resulted in the subsequent downsizing of active workers. Many mining company employees, artisanal miners, traders, even mining company officials were out of work. Some also lost their jobs during restriction of movements and total shutdown of business operations. The officials of the National Bureau of Expertise (BNE) in Guinea that had to approve all diamond exports, confirmed that they had been out of work since the beginning of April due to the closure of air and land borders.
The Covid-19 lockdown measures in the first quarter of the year resulted in the fall in diamond prices including huge disruptions of trading routes and operations. India, with the largest concentration of polished diamonds, took a hit in the diamond market trade. Data from the Gem and Jewelry Export Promotion Council showed that India’s imports of rough diamonds plunged from $1.5 billion in February to $1 million in April. The Gem and Jewelry Export Promotion Council also reported that India’s polished-diamond exports were down by 26% year-on-year to $1.64 billion in August. (It was $2.18bn in August 2018). The Covid-19 evidently did not spare Diamond hubs as they also suffered the plunge. The RapNet Diamond Index (RAPI) popularly known as the industry benchmark for price trends showed in the first quarter of 2020, the price of 1-carat diamond fell by 8.7% (and down 13.1% year-on-year) while the price of 0.5-carat diamonds went 4.9% lower (and down 9.5% year-on-year).
Several diamond mining countries such as Russia, Botswana, the Democratic Republic of Congo, Australia, and Canada were largely affected. The high impact of the coronavirus crisis directly affected production and demand, creating supply chain and market disruptions which also adversely affected the global financial markets. Belgium’s polished imports slumped 71% and exports dropped 51% in March, giving the first glimpse at a decline in trading levels as coronavirus spread globally. Hong Kong government says the retail environment has turned more austere again amid a resurgence of Covid-9 cases as their June sales of jewelry, watches, clocks, and valuable gifts down 57% to HDK 2.5 billion.
With the risk of the permanent closure of mines, diamond miners seek ways to extract more value from their mines regardless of the hit from canceled or delayed sales including the pressure of the market downturn. Meanwhile, some gem workers leave the city and abandon mine sites to explore other means of livelihood such as agriculture.
Some diamond trader networks with the necessary cash flow abstained from pre-financing arrangements. While several diamond mines were closed to preserve cash flow. The pandemic caused a rapid decline in cash flow and some companies were forced to lower the cost of diamonds, squeeze prices, and even freeze sales.
While the fall in prices is a great concern for the diamond miners and traders, it seems like the best time for diamond consumers. The price of diamonds has become more appealing and there really has never been a better time to buy diamonds while the prices are as favorable as they are now. With the gradual ease of the lockdown in some countries, some affluent investors have taken advantage of this opportunity to purchase large, high-quality diamonds. Meanwhile, the ill-intentioned companies demand and stock up on cheap artisanal diamonds which they plan to sell with huge profits when the disruptions of international supply are relaxed.
Despite the Covid-19 crisis, diamond mining companies such as De Beers and Alrosa moved to defend their diamond market. They refused to cut prices in an effort to control their stock levels and they also reduced production hence, the diamonds kept piling up. “They’ve tried to restrict rough-diamond supply to protect the market and protect value,” said Gemdax partner, Anish Aggarwal.
After the pandemic paralyzed the diamond industry, De Beer decided to cut the price of its diamonds. They lowered the prices of their rough diamonds above 1 carat. De Beers says sales rose 11% year on year to $320 million during the August cycle amid improvement in the diamond market. They still recorded the highest sight sales since January as rough demands improve ahead of the holidays. Producers over manufacturers to retailers along the supply chain are now focused on their recovery from the Covid-19 pandemic. They also intend to scale up, promote the artisanal diamond sector, and eliminate avenues for illicit trade.
As the pandemic eases, several countries are gradually lifting Covid-19 restrictions. Chinese retailers have resumed trade operations while manufacturing in India has resumed at 50% capacity. Belgium polished exports rise 6% year-on-year in August as demands returned. Retailers who are able to adapt their businesses to online trading and commerce have gotten better sales.
Diamond miners across different countries have begun seeking innovative ways and new work methods to protect the diamond industry. Now, there seem to be signs of recovery in trading and a reduction in the decline of diamond prices compared with earlier months. Although, the ultimate recovery of the diamond industry will largely depend on higher demand for diamonds and the returning of customers to jewelry stores.