There are restrictions on the reserves and output of natural diamonds, and the long-term price trend is upward: at present, the proven diamond reserves with mining value are about 2.5 billion carats. If 100 million carats are mined every year, they can be mined for 25 years, and they are mainly concentrated in the hands of enterprises such as erosa and De Beers. The upstream belongs to the game equilibrium of typical oligopoly. At present, the estimation is calculated according to the reserves, The realizable reserve mineral values of erosa and De Beers are US $81.6 billion and US $52 billion respectively. Through trade centers, trade fairs, appraisal institutions and other industry-specific systems, the upstream end is guaranteed to maintain monopoly for a long time, and all parties in the whole industrial chain tend to maintain the existing interest pattern. The price of rough natural diamonds is anti inflationary for a long time, and the price of medium and short-term diamonds is rising due to the tight supply and the recovery of demand after the epidemic.
The downstream end creates premium based on brand, and natural diamond is the high-quality carrier of value symbol. From the perspective of profit distribution of the current industrial chain, the grinding and cutting industry in the middle reaches has low barriers, weak bargaining power and strong substitutability. However, downstream brands and retailers can gradually sort out the brands facing consumers through the expansion of stores and marketing, and have obvious information advantages over consumers to achieve the profit level of high-end consumption. From the perspective of consumers, because natural diamonds do not have use value, they are in line with the contractual attribute of the wedding itself and have the attribute of luxury. In countries with moderate female labor participation (55% – 60%), natural diamond consumption will continue to grow as long as the economy maintains growth.
There is no production capacity limit in the upstream of cultivating diamonds, which is more suitable for subdividing functional tracks. The same physical attributes do not represent the same commodity attributes, especially in the field of high-end consumption. The technology for cultivating diamonds has been very mature, and the product quality can exceed that of natural diamonds. However, due to the economic benefits of expanding production in the upstream, the retail and wholesale prices will continue to be differentiated relative to natural diamonds. Cultivated diamonds have comparative advantages in color diamonds, commemorative diamonds, high-tech materials and other fields. The positioning of the industrial chain should be clearly distinguished from traditional jewelry. Under the consumption attribute of Yueji, similar to the consumption of an iPhone or a light luxury shopping, the price of a standard carat diamond will be reasonable between 5000-10000.
Investment suggestion: we believe that due to the scarcity of resources and the rhythm of capacity release, the price of natural diamonds will maintain a stable upward trend. Its natural attribute is the basis of value. The whole industrial chain will tend to maintain the existing interest pattern, and will dominate in the field of wedding and non wedding luxury goods for a long time. Suggestions: Chow Tai Fook, DEA shares, Chow Tai Seng Jewellery Company Limited(002867) . At the same time, it is also worth paying attention to the cultivation of diamond brand by building the consumption concept of Yueji at the terminal. It is suggested to pay attention to: Shanghai Yuyuan Tourist Mart (Group) Co.Ltd(600655) .
Risk tips: 1 The impact of newly discovered natural diamond mining areas on the supply side; 2. After the depletion of natural diamond resources, the reconstruction of the interest pattern of the industrial chain may affect the brand premium.
