Natural diamond prices continued to rise
Since 2021, the impact of production and transportation on diamond trade has continued, but the rapid recovery of underground tourism demand in Europe and the United States has led to the continuous rise of natural diamond prices. IDEX data show that on March 1, 2022, the global diamond price index has increased by 9.9% compared with the end of the previous year. DeBeers, Alrosa and Petra, the main natural diamond producers, have successively raised the blank price in January, with an increase of more than 5%.
In the long run, the price trend of diamonds is highly related to the price of gold. As the marginal impact of the epidemic weakened, the recovery of downstream consumption led to the rise of diamond prices. Under the economic stimulus, inflation expectations are high. 1-3 carat naked diamonds have good liquidity and value preservation, and are becoming more and more important in asset allocation. The rising consumption of large grain diamonds has boosted the diamond price index.
Russian exports may be blocked and the price of natural diamonds remains high
On February 26, the United States, the European Union, the United Kingdom and Canada issued a joint statement on sanctions against Russia. The United States and its allies promised to remove the selected Russian banks from the swift system. Russia’s foreign trade is highly dependent on swift system. At present, the sanctions have not been implemented. If they are implemented, the diamond trade may be affected. As an important raw material exporter in the world, Russia has close trade ties with major economies, and the intensity of sanctions remains to be seen. Since 2021, diamond supply and demand have been in a tight balance. Stimulated by short-term negative news, the price of natural diamonds is expected to remain high.
In 2020, the amount of rough diamonds exported by Russia was about US $3 billion, of which 80% were re exported through Antwerp and Dubai or directly exported to the Indian polishing market. As a midstream country, India needs to import a large number of diamond blanks from the upstream, and has faced problems such as unstable supply and continuous rising prices of blanks.
Investment suggestion: the supply of natural drilling is limited, but the downstream consumer demand is strong, and the price is expected to remain high. At present, the penetration rate of cultivated diamonds in the world is only 4%. After the price difference between cultivated diamonds and natural diamonds is expanded, the cost performance advantage is highlighted, and the downstream demand is expected to be further improved. China’s diamond cultivation production is mainly based on high temperature and high pressure method, and the production capacity is concentrated in Henan Province. Industry leaders expand production and speed up, and the concentration of production end is expected to be further improved. 1) Production side: it is recommended to pay attention to Henan Liliang Diamond Co.Ltd(301071) , North Industries Group Red Arrow Co.Ltd(000519) , Henan Huanghe Whirlwind Co.Ltd(600172) , which have high market share and good cooperation with upstream equipment manufacturers; 2) Equipment side: it is recommended to pay attention to the supply of HPHT synthesis equipment and the layout of Sinomach Precision Industry Co.Ltd(002046) .
Risk tip: industry competition intensifies, downstream demand is less than expected, and the supply of natural diamonds increases.
