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Diamond Midstream Improving Efficiency, Says Bain

Cutting sector is streamlining business models to restore profits.
Dec 13, 2017 10:37 AM   By Rapaport News
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RAPAPORT... Tough market conditions are forcing diamond traders and manufacturers to adjust their business models amid sluggish consumer demand, according to a report by management consultancy Bain & Company. 

While miners’ sales of rough diamonds to the midstream leapt 20% in 2016, global diamond-jewelry sales were stable for the year, Bain said in this week’s report, which it produced in collaboration with the Antwerp World Diamond Centre (AWDC). As a result, the cutting-and-polishing sector recorded a slight drop in revenue.

Midstream diamond players are working to improve their operations, focusing mainly on reducing the amount of time it takes to cut, polish and sell goods, and on securing financing, the report said. Companies are also introducing new technologies such as automated cutting processes and diamond mapping to maximize yields.

“The midstream segment’s future health will depend on the interplay of rough and polished prices as well as the segment’s ability to make continued operational improvements,” explained Bain partner Olya Linde, an author of the report, titled “The Global Diamond Industry 2017.”

Rough producers had a strong year in 2016, with the top five miners’ combined operating profit rising 3%, Bain reported. Even so, rough prices, which dropped in 2015, fell again in 2016, before increasing this year.

Polished prices, however, have declined, with the RapNet Diamond Index (RAPI™) for 1-carat diamonds falling 5.8% in 2015 and slipping 5% in 2016. RAPI for that category slumped 6.7% in the first 11 months of this year.

“Continued softening demand could have significant economic implications for entire nations that depend on the industry as one of their sole sources of revenue,” Linde added.
Tags: Antwerp World Diamond Centre, AWDC, bain, Bain & Company, cutting, Manufacturing, midstream, Olya Linde, polished demand, Polishing, Rapaport News, RAPI, RapNet Diamond Index, technology, The Global Diamond Industry 2017
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