Dividends and How the pandemic upended the global diamond industry

In a normal year, all over the world people would be getting married and going through the process of engagement rings, wedding rings, inviting people to witness and celebrate the wedding. All wonderful aspects of life. When COVID hit and people having to keep space between each other, the wedding business has collapsed. Business has also collapsed for diamond sales. The demand has plummeted freezing sales and squeezing prices.

In an article by Helen Reid, Tanisha Heiberg and Rajendra Jadhav of Reuters, the only bright spot in the diamond industry is for large, high quality diamonds from affluent investors, according to financiers and sales data. Prices for high quality one carat diamonds have risen 12%, however lower than 1 carat the prices have gone done or not gone up, according to trading platform RapNet.

The issue for diamond miners is most diamond that come from the mine are not the large high quality diamonds they are the lower quality stones. The diamonds typically travel to India where 80% of the world’s diamonds are polished. Indian imports of rough diamonds plunged from $1.5 billion in February to just $1 million in April, data from the Gem & Jewellery Export Promotion Council show.

Antwerp, Belgium long a diamond hub, saw rough imports drop 20% according to the Antwerp World Diamond Center. The city’s exports of polished diamonds fell 46%.

The large diamond miners have either not opened up or slowed production such as Rio Tinto’s Argyle diamond mine in Australia; Storoway Diamonds’ Renard mine in Canada; Petra Diamonds’Williamson mine in Tanzania and Firestone Diamonds’ Liqhobong mine in Lesotho.

A number of years ago, De Beers who once controlled the diamond retail market had an advertisement than says diamonds are forever. De Beers is laying off people.

In 2019, the diamond industry was worth $80 billion. The bright blue box of Tiffany noted during February-March engagement jewellery was the worst performing category, with sales halving. Traditionally people get engaged in the winter months and married in August.

Linking to dividend paying stocks, we all grow up with expected biases and notions and for many people buying engagement rings and wedding rings are the expected in society. With COVID, people were not meeting, things changed rapidly. Hopefully when health rules are back to normal, people will go back to the normal habits of engagement and weddings. All businesses examine their operations for a worst case scenario, most never expect to deal with it unless it is a natural disaster. How are your investments doing with the changes?

There are more questions than answers, till the next time – to raising questions.

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