The latest Bain report on diamonds is out, and it puts a sparkle on what is definitely a trying time for the world’s diamond industry. The investment firm’s report promises that the diamond business, which is currently in the midst of an undeniable slump, will return to business as usual in two years or so. But in the pages of the nearly 50 page report you’ll find no mention that this slump has claimed about 66,000 jobs in India — and at least 10 lives to suicide.

It’s understandable that the report puts a high gloss on a troubled but glittery business. It is, after all, a management consultancy business, and it’s not going to garner a lot of customers if it goes around talking trash about its potential customers’ lines of work. But it just takes a little reading up on the diamond industry today to see that while Bain’s research is sound, there’s a bit more going on here, and the diamonds in this report are — well — maybe a bit low-grade in color and clarity.

You can read the report yourself here. Let’s dig in.

2019: An unpolished year

Throughout the report, Bain reiterates that 2019 was not a great year for the diamond business. That is, to say the least, an understatement. But the report does do a good job in quantifying several ways in which 2019 was a drastically awful year, such as:

• Lower demand led to price decreases of 10% to 15% for midstream players (ie, diamond polishers in India)
• Rough diamond sales (ie, from diamond mines in southern Africa and Russia) were expected to fall 25 percent in 2019 even though production remained stable, suggesting that the price per carat is falling
• Mining and midstream revenue was expected to fall 25% and 10%, respectively, in 2019
• Demand for rough diamonds stalled since the second half of 2018, leading to a 25% decrease in rough diamond revenue in 2019
• The supply of natural diamonds is expected to continue to decrease 8% through 2021
• Sales of cut and polished diamonds to retailers is expected to fall between 10% and 15% in 2019 due to weakened consumer confidence and lower demand for jewelry
• Net imports of rough diamonds to India (where 90-95% of all rough diamonds are polished) fell an astounding 32% in the first eight months of 2019 alone
• Retail sales of diamonds in the US were forecast to fall up to 2 percent in 2019, depending on how year-end holiday sales fare — which can be a considerable amount, considering the razor-thin margins many retailers depend upon
• Disturbingly, the Bain report forecasts a U.S. recession in the coming decade that will hurt the lower-middle class the most, and could cost 30-50 million jobs by 2030 (it calls this “short and mild.”)

Yet despite these setbacks, the report points to the diamond industry’s historic resiliency and predicts a two-year bounce-back. Within that two year period, Bain says, the diamond business will sell through its existing surplus, and prices will stabilize and start to climb once again.

I’d understand if you think that’s not candy-coating the situation. And true, those are some sobering statistics. But I contend they don’t present a full and accurate assessment of the situation in the global diamond industry at this time.

Clarity on inclusions: today’s diamond industry

The 2019 Bain report on the global diamond industry neglected to point out some key trends in the diamond business that have figured prominently in the headlines over the past year. Without them, it’s hard to have a true handle on what’s happening in the diamond business.

For instance, nowhere in the 49-page document is there any mention of the massive layoffs that have gripped the Indian diamond cutting business centered around the city of Surat. Around 500,000 people had been employed in about 3,500 diamond cutting firms at its height. The most recent news account I could find, from November, said that some 66,000 of those workers had been laid off, and the situation has only gotten worse since then.

Even worse, there have been at least 10 former diamond cutters who have committed suicide after losing their jobs. Those are just the people known to the diamond workers union — there could be more outside the union. Beyond that, other former diamond polishers have reported losing their wives and kids as well as their jobs, losing their homes, being unable to feed their children or get them medical care or depending on family members to survive. You’ll find no mention of any of this from Bain.

There also appears to be a crisis in mining. Australia’s Argyle Mine, The world’s largest diamond mine, and one of the few producers of natural pink and red diamonds, is set to close later this year. There’s a chance the Petra Diamonds Mine in South Africa could collapse. DeBeers is in the process of closing its Voorspoed Mine in South Africa and ceased operations at its Victor Diamond Mine in Ontario, Canada in May 2019.

These closings come amid an extremely rare move: De Beers, the world’s largest diamond producer, actually cut the price of its rough diamonds by 5% in 2019. That’s something almost unheard of from a company that in 2004 pled guilty to price fixing.

Diamonds: Future cloudy, ask again later

So which is it? If diamonds are forever, is this moment merely a blip against the eternity of the gemstone’s immutable worth? Or are we in the midst of a seachange that means the end of the old way of doing business and the start of something entirely new and different?

Time, of course, will tell. But here are a few things to consider.

First, there’s the growth of lab created diamonds. If you know much about diamonds at all, you know that they’re basically just carbon. Carbon that’s been treated under great heat and pressure until they shine. The thing about heat and pressure is, you don’t need to rely on the earth’s mantle for that, you can do that in a laboratory, too. And that’s what’s being done more and more often.

The Bain report speculates that lab created diamonds could follow the path already tread by lab created sapphires. Like their blue counterparts, the cost of lab created diamonds is coming down, making them more of a value buy for consumers. Diamond producers are trying to distinguish mined diamonds from lab created diamonds through marketing slogans such as “Real is Rare” — essentially attempting to carve out a seperate (cheaper, downscale) market for lab diamonds. Bain forecasts this new market could comprise up to 15% of the total diamond market by 2030.

The use of online sales for diamonds will continue to grow, too. If you are interested in buying diamonds retail and haven’t checked out sites like BlueNile or JamesAllen, you owe it to yourself. (NOTE: I do not get a kickback from either — I’ve just used Blue Nile and loved it and would recommend it to anyone shopping for a diamond). It allows you to pick out a diamond by prioritizing cut, color, clarity and carat, allows you to see what diamonds are available that match your specifications and price range, shows you the GIA reports on them, lets you pick which setting you want to place them in and more. The growth of online sales could disrupt brick-and-mortar sales, but it gives consumers a lot more knowledge and buying power.

Finally, there are geopolitical forces at play, too. Growing markets in China and India will have a lot to do with overall demand for diamonds. And then there’s the relationship between countries. Right now, China and the US have an ongoing trade feud that’s resulted in a 15% tariff on diamond sales between the two countries and depressed some sales. All those things are unknowables and, frankly, out of anyone’s control, at least as far as people in the diamond business go.

But as long as there are people who find a value in diamonds, there will be a demand for them. And as long as there is demand, there will be people mining them, cutting and polishing them, trading them in the world’s bourses and musing about their worth and their future. In that sense, they truly are forever.