The future of forever – My interview with diamond industry analyst Paul Zimnisky

The diamond industry has always fascinated me. But as I started learning more about it I always came up with even more questions. Fortunately, I was lucky to be able to contact one of the most authoritative people in the business to find out more – Paul Zimnisky.

Paul is an independent diamond industry analysts and consultant. He also writes the “State of the Diamond Market” report at

In this interview we talk about the impact of COVID on diamond mining, the appetite from investors and the challenge in setting up diamond futures contracts. I learned a lot from this conversation and I’m sure you will to.

1. It appears that diamonds face a much more competitive marketplace in the luxury goods sector. Will they ever recover the same mystique that they had in the 20th Century?

In my opinion this will really come down to marketing. I estimate that the industry is currently spending less than half of what it was 25 years ago, in inflation adjusted dollars. Diamonds were unique in that historically most of the diamonds sold were “generic,” so the “A Diamond is Forever” campaign suited, or the other way around. Branded diamonds/jewelry has become much more important to consumers in recent years and I think this trend will continue, so a lot of those marketing dollars are being directed towards brands more so than selling generic diamonds. That said, all in all, relative industry marketing spend is down based on what I have seen. In addition, the lux/consumer discretionary space has become more competitive, due to new products, tech etc.

Octahedron shaped rough diamonds approximately 3-carats each. Picture taken in Antwerp. Source: Paul Zimnisky

2. The typical time most people ever buy a diamond is when they get engaged. Are engagement rings still the main source of demand for diamonds? If so has COVID had a big impact on that sector of the market?

Bridal represents about 1/3 to 40% of diamond demand. Gifting and self-purchases represent the balance of demand. The self-purchasing segment is the fastest growing; these trends have continued into the pandemic as far as I have seen. Although, bridal still remains strong.  

3. Are you seeing more interest from investors looking at diamonds as an option? The concept of stock-to-flow is becoming better understood as to how scarcity imputes value. Are investors seeing diamonds in the same vein and as a potential alternative store of value akin to gold?

I think there has always been interest in diamonds as an investment vehicle. The lack of fungibility, i.e. there are thousands of different categories of diamonds by size, shape, color, overall quality etc., has made liquidly difficult relative to other actively held “store of value commodities” like precious metals. In circumstances where currency debasement/inflation becomes a broader concern, like now, there is always an uptick in interest in diamonds as an investment. Most of this actual demand comes from high-net worth investors that buy the rarest, most desired stones and self-store them, as they want to own the physical asset.

4. Why are the share prices of diamond miners a poor proxy for diamond prices? What are the big risks that investors face and what are they missing (resource nationalism, etc.)?

The diamond miners are still a viable proxy for the diamond price in my opinion. Building a new large-scale mine is extremely expensive, think $1B+, so the independent miners tend to have a lot of debt on the balance sheet at least at the early stages of production, which puts the pressure on. Given that diamond prices have been flat to down in recent years, it has been a difficult environment especially for the miners with new mines.

5. What are the barriers to investing in physical diamonds? Poor liquidity, lack of price transparency and high transaction fees I’m guessing but are there other things people need to think about?

The lack of fungibility and the expertise required given that every stones is technically different.

6. According to DeBeers “The plain fact is that diamonds are not a commodity; they are unique.” Are they correct?

I think that is more marketing parlance. Diamonds are a non-renewal natural resource, so whatever that is lol.

7. Diamond futures contracts have been proposed as far back as the early 80’s. What are your thoughts on more recent attempts to make diamonds more of a ‘commodity’ that can more easily traded? For example GemShares, Singapore Diamond Investment Exchange, Indian Commodity Exchange and then recent ‘blockchain’ ideas.

I think there is demand for a product that allows diamonds to trade as a commodity, which would be used by industry participants, financers to the industry, for accounting/marking purposes, hedging etc. But again, fungibility has been the biggest challenge here.

8. Where can investors find out more on what is happening in the diamond market, e.g. Rapaport, IDEX and

This is a very niche industry but it is also an industry with some really good specialty news coverage, consultants, analysts etc. as you mention.

9. Do you see diamond miners becoming more vertically integrated, i.e. capturing value from the retail end, either online or through luxury brands?

Yes, I do think this could make sense, especially from a supply-chain transparency standpoint. For example, Tiffany can track their diamonds through the whole supply chain without external interference and thus can provide customers with a whole history of where a diamond has been. That said, I think the industry has not seen more of this given the expertise required at each stage of the supply chain: miners are good miners, manufacturers are good cutters/polishers, retails are good at merchandizing and branding.

10. Has the diamond business become more transparent? Blood diamonds of course, but is there more that has or can be done to improve transparency and sustainability?

Yes, absolutely and even more transparency is on the way, i.e. see the aforementioned Tiffany example. Also, the large majority of global diamond production is done by large commercial, publicly traded companies, so there is transparency required by financial regulators etc.

11. Are lab grown diamonds becoming more popular with consumers due to transparency concerns?

Transparency is certainly something customers are looking for, that said, most lab-diamonds are produced in China or India, so the supply chain is still globally diverse and there isn’t always the transparency you would hope there is. But there are certainly companies producing in the U.S., for example, that do all the processing domestically to keep their product as transparent as possible, and this is probably a viable business model. All of this said, from what I have seen, most customers that are choosing lab-diamonds over natural diamonds are doing so because they are a lot cheaper, period. And, I think ultimately this is what will differentiate the product the most in consumers’ minds going forward: the price; so the question becomes is the customer buying “fine jewelry” or “fashion jewelry” when they purchase a lab-diamond –and how will this impact their purchasing decision?

12. Is the diamond industry facing any supply-side constraints due to COVID? For example is its spread in India affecting polishing or have any mines had to stop/curtail operations?

Yes, the industry is currently going through the biggest supply constraint since the global financial crisis –in both mining and manufacturing. The effect is so significant, that I estimate global diamond production will be the lowest it has been since the 1990’s this year.

13. In the past the diamond mining business was characterised as monopoly controlled. De Beers no longer controls the sector in the same way that it did in the past. How would you describe the structure of the diamond mining business and what should investors be paying attention to?

It’s more of an oligopoly now in my opinion. The two major miners produce as much as 2/3 of global supply. That said, the industry structure change has led to more volatility in prices as many rough diamonds are now sold on tender or at auction in which price is more of a reflection of market dynamics.

14. What are the most misunderstood aspects of the diamond industry?

I think the resilience. The industry has been through so much and most people, at least in the Western world, still want a diamond when they get engaged. Diamonds are unique in that they are one of the few luxury items that most women will receive in their life at one point or another. The industry is now seeing this trend shift to China and southeast Asia, which I think shows how much diamonds resonate with the human consumer.

15. Where can people find out more about you Paul?

You can find me on Twitter @paulzimnisky. I publish a monthly subscription based industry report called “State of the Diamond Market”. You can find out more information here:

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