Welcome back to the Rapaport Market Comment.
Last week we spoke about the Boston Consulting Group’s analysis of the Indian and Chinese retail
markets and how demand for gold and diamonds was changing. Go to see first that video first, in
case you missed it. This week, we’re going to focus on recycled diamonds and jewelry, another
topic the group addressed in its recent report, “The Future of the Natural Diamond Industry,”
published last month and commissioned by De Beers. Recycled goods are a small part of
the overall market. They account for less than 10% of the total supply of natural
polished diamonds, according to the report. Recycled diamonds and jewelry, in the
sense that people usually use the terms, refer to goods that a consumer has
already owned and have reentered the market. This can happen either
with the jewelry staying intact, or with the metal being melted and the diamonds
removed and resold as loose stones or even recut. It’s worth noting that the term “recycled”
has been criticized in the jewelry context because it doesn’t come from waste material.
But it’s the term that most people use. As the report points out, the main reason for
these diamonds coming on the market are divorce, financial necessity, death of the owner, or
simply changes in preferences. It says the proportion of recycled diamonds currently coming
on the market due to inheritance stands at around 20% and will likely increase as the people
who originally acquired the diamonds die. As for the remaining 80% coming
from non-inheritance sources, the report predicted that these
factors would likely remain steady, with the fluctuating price of
diamonds impacting the desire to sell. I want to zoom in on an important observation.
The proportion of diamonds removed from recycled jewelry and sold “as new” has steadily declined in
recent years, the report said. In 2021, it stood at about 30% of the total value of the diamonds
in recycled jewelry, down from 60% in 2015. Why did this happen? Boston Consulting Group believes there are influences
on the sell side and buy side. Firstly, sellers can get more value from
vintage jewelry by selling them intact rather than moving the stones. The report
estimated that reintroducing diamonds into the supply chain reduced their value by
30% to 40% because the dealer needs to make a margin and due to the costs of melting,
logistics, testing and proving authenticity, and, if necessary, the costs of recutting.
They also must compete on price with newly produced diamonds. Unlike with gold,
there’s also a lack of ways to trade recycled diamonds and a lack of transparency
on their price, according to the report. Buyers also prefer intact pieces.
They value the “unique design, affordability and sustainability aspects”
of vintage jewelry, to quote the report. This makes the vintage jewelry piece
more than just the sum of its parts. Finally, there is an increasing number of
online consumer-to-consumer platforms that make it easy to trade in secondhand
vintage jewelry, from eBay to Etsy. Boston Consulting Group predicts that this
trend will continue, leading to recycled diamonds become an increasingly smaller
proportion of total natural-diamond supply. One question I have is whether
this really reflects the entire recycled market. I understand the value in
trading a signed Cartier piece on Ebay or another platform, but what about the masses of
average-quality goods that come on the market? Also, the price of gold is at a record high, even if prices of diamonds are not. Isn’t now
the best time to break up jewelry pieces and melt down the gold, leaving a bunch of
loose diamonds that need to be resold? Let us know what you think in the comments! Next week we will discuss some of the
factors that could move the industry off the basic growth pattern that Boston
Consulting Group forecasts. See you then! This video is sponsored by RapNet, the
world’s largest and most trusted diamond trading network. If you buy or sell
diamonds, RapNet is the right solution for you. Find out more, at RapNet.com. Thanks
for watching, and enjoy the rest of the week.