Diamond industry heading towards turning point: McKinsey

The younger consumer base will lean towards an ethically sourced diamond.    

The diamond industry is facing an inflection point as customer demand is shifting driven by changing demographics and increased awareness of social and environmental sustainability, according to a McKinsey report.

The report cited a Euromonitor survey that stated 58% of Gen Zers purchased luxury apparel and accessories three times more last year, compared with 41% of baby boomers globally.

The younger consumer base is also more interested in digital, branded, and socially conscious products resulting in the market share of lab-grown diamonds (LGDs) rapidly increasing.

Furthermore, as a potentially environmental, social, and governance (ESG)-friendly alternative to natural stones, LGDs are increasingly attractive to younger buyers. However, Chinese buyers lean toward natural stones.

Moreover, as consumers are gaining confidence in buying luxury items online, online purchases of fine jewellery are expected to increase by nine to 12% from 2019 to 2025.

Meanwhile, McKinsey’s estimates show that natural diamond production is expected to grow at 1% to 2% per annum until 2027, below previous trends of 3% to 4%.

Growth will likely be constrained by a combination of major mine closures, production ramp-ups for existing mines, and price volatility.

In the current market, midstream diamond companies are trying to hold less inventory to increase liquidity and buy with cash rather than credit. With this, diamond companies rely less on bank loans and operate their businesses with more financial autonomy.