De Beers' full-year sales were down 5% relative to last year and up 53% over 2015. Russian-major, Alrosa is on pace to sell $4.4 billion of diamonds in 2017, which would be in line with 2016 and 27% higher than 2015. 

 

This year has been one of excess inventory shifting from the upstream segment of the industry to the mid-stream segment. For instance, industry leaders De Beers and Alrosa have both see their inventories decrease by an estimated 1.6 million carats and 2.3Mct, respectively, though the September quarter. This is despite both producers increasing production this year. 

 

Worldwide natural diamond production is estimated to rise to approximately 148Mct in 2017, a 7% increase in volume over last year. The increase is mostly due to the commencement of production at three new mines, the ramping-up of production at previously curtailed operations and expansion projects at legacy mines. 

 

Despite various operating setbacks and political challenges disrupting production at multiple mines this year, including an accident that has since halted production at Alrosa's Mir mine, most major miners are still on pace to produce towards the higher end of their guidance ranges. 

 

 

The majority of industry participants would agree the first half of 2017 was strong, with second half relatively disappointing. Demand for rough diamonds returned aggressively in early-2017 as manufacturers in India recovered from the late-2016 liquidity crisis caused by the government's demonetisation policy. 

However, by mid-year, new polished diamonds entering the market compounded an already overstocked global polished inventory and manufacturers noticeably pulled back operating activity, punctuated with longer-than usual Diwali factory closures in the fall. 

 

In recent weeks, manufacturer activity has begun ramping up again as the industry prepares to replenish Christmas and Indian wedding season stock and deliver for Chinese New Year demand. 

 

The US consumer market is currently supported by a relatively strong economy. With the stock market regularly recording all-time highs and with most employment figures at favourable levels, consumer sentiment is positive. Pending tax reforms and the appointment of a new US Federal Reserve chairman that favors continued dovish policy has supported this trend. 

 

America's largest jeweler, Signet Jewelers, had a challenging 2017. Yet, most of underperformance can be attributed to the side effects of the company restructuring, not necessarily the appetite of the US consumer. In fact, globally-diversified Tiffany & Co recently noted that the US market was one of its strongest. 

 

Tiffany also noted particular strength in the company's mainland Chinese market. Recent results from leading greater China jeweler Chow Tai Fook supports this as the company has seen same-store-sales growth for four consecutive quarters in its mainland market and three consecutive quarters in Hong Kong/Macau. 

 

Luk Fook, which has a greater exposure to Hong Kong than the more mainland focused Chow Tai Fook, registered same-store-sales growth of over 11% in the six-months ending September 30, which stands out against three prior comparable years of decline. 

 

On November 21, Chow Tai Fook described the current market as a "turning point … given the nascent jewelry market recovery" and Luk Fook has recently described the climate as "improved".

 

The US is still by far the largest end consumer market for diamonds at about 50%. Greater China, which includes mainland China, Hong Kong, Macau and Taiwan, and India represent the industry's fastest growing large markets. 

 

Global diamond supply is estimated to marginally decrease about 1.5% in 2018 to 146Mct and global polished diamond wholesale demand is estimated to hit $26.6 billion next year, which would be a 3.8% increase over 2017.

 

Heading into 2018, here are some possible diamond industry catalysts to watch for: