The World Has a Diamond Glut. Why Is That a Problem?

Mines are closing, and middlemen are being squeezed. But don’t expect bargains at the jewelry counter.

LONDON — Is it ever possible to have too many diamonds? For many in the business of producing and trading these gems in recent years, the answer is yes.

The top diamond miners in the world, including the two largest, Alrosa and De Beers, have an inventory problem. So do many of the cutters and polishers who buy the rough stones and sell them to retailers. At every stage of the supply chain there are too many of these precious gemstones, whose marketing has long depended on their rarity.

A glut in many other industries would ordinarily lead to deep price cuts. But consumers are buying stones that have passed through many layers of middlemen: traders, polishers and cutters, who have absorbed much of the raw stones’ price volatility, as well as brands and jewelry houses that create rings, bracelets and necklaces. This has kept retail prices relatively constant, fueled by robust demand from shoppers all over the world.

Still, challenges are mounting for the $17 billion diamond mining industry. The oversupply of rough stones and the increasingly strained finances of middlemen have hit miners’ balance sheets in recent months as they try to manage the surplus and increase the value of existing stones.

The Argyle mine, in a remote region of Western Australia, was responsible last year for 10 million to 15 million carats of the entire global diamond output (140 million to 145 million carats). Argyle is also the source of some of the rarest, most expensive gems in the world: pink, purple and red diamonds.

The Argyle diamond mine in Western Australia is set to close at the end of 2020.CreditRio Tinto

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