Securities Times reporter Li Mingyu and Yan Cui
The performance in the third quarter was unsatisfactory, and the production capacity of leading companies was terminated... The cultivated diamond industry, which has attracted much attention from the capital market, has cooled down significantly recently.
During the interview, a reporter from Securities Times·e Company learned that recently, all links in the cultivated diamond industry chain have experienced a downward trend in prices, and the industry has also begun to be alert to the problem of overcapacity in the upstream rough.
Many people in the industry believe that although the future market of cultivated diamonds has broad prospects, when the terminal market has not yet formed a scale, the supply side expands in disorder, causing the balance of supply and demand to shift.
As an emerging market, there is still a long way to go to cultivate diamonds.
Capacity Expansion Brakes
Benchmarking natural diamonds, cultivated diamonds have the characteristics of "same quality and low price", which made this emerging market once heard that the demand is in short supply.
Relevant enterprises have become the darlings of the capital market driven by the rise in product volume and price, and various industrial capitals have come one after another.
While the market has not fully recovered from the surging tide of expansion, the surge in upstream rough production capacity of cultivated diamonds has begun to "brake the brakes".
On the evening of September 30, Yellow River Cyclone terminated the non-public issuance of A shares in 2022.
At the beginning of April, Yellow River Cyclone announced that it planned to raise funds of no less than 800 million yuan (inclusive) and no more than 1.05 billion yuan (inclusive) from the wholly-owned subsidiary of the listed company's controlling shareholder, Huanghe Industrial, after deducting the issuance costs. The 800 million yuan of the net amount will be used for the industrialization project of cultivated diamonds.
As one of the leading companies in the superhard material industry, this fixed increase has become an opportunity for Yellow River Cyclone to enter the field of artificial diamond consumption and expand new profit growth points.
According to the announcement at that time, the total investment of the cultivated diamond industrialization project reached 1.244 billion yuan, and it was planned to add 500 sets (sets) of the world's leading intelligent super-large cavity presses, with an annual output of 586,600 carats of high-temperature and high-pressure cultivated diamonds.
However, after less than half a year, this certain increase was announced on hold.
As for the reason for the termination, the Yellow River Cyclone simply summed it up as "many changes have taken place in factors such as the industry situation, market environment and capital market".
After returning from the 11th long holiday, the company's stock price has received two daily limits in succession, and continued to fluctuate downwards.
As of October 31, the lowest has reached 5.01 yuan / share, which has shrunk by more than 36% from 7.87 yuan / share before the termination of the fixed increase.
When the industry is on the rise, the expansion of production has stopped, which makes the market a little puzzled about the operation of the Yellow River Cyclone, but in the opinion of the industry, it is helpless to terminate the fixed increase.
"In recent months, the price of rough cultivated diamonds has fluctuated significantly, and the market as a whole has shown a trend of increasing volume and decreasing prices. The Yellow River cyclone has not caught up with the rhythm of the rising price. At present, the market fluctuates significantly, and rational cooling continues. , it is no longer suitable to expand production in a big way." Li Bo (pseudonym), a person in charge of upstream production enterprises, analyzed this.
For capacity expansion, industry companies are now more cautious, and the market growth has slowed down.
"Two years ago, the supply of presses was tight, and some companies paid for the machines in advance. Now even if there is an increase in production capacity, the production is not as fast as before." Li Bo said.
Prices fell across the board
The price of the product fluctuates, which can be intuitively felt from the terminal.
Shenzhen Shuibei International Jewelry Trading Center is the professional jewelry trading market with the largest trading volume in China.
Offline cultivated diamond brands will be marked with the word "Grown Diamond" in a prominent position in the store.
During the afternoon of the working day when the reporter went to visit, the business of several stores was light and few people visited.
"The price of cultivated diamonds has been changing, and it has indeed fallen a lot a while ago, mainly due to the influx of the industry. However, the market price has risen slightly recently, and is now basically stable at about one-third of the price of natural diamonds. "Talking about the market conditions in recent months, a businessman of a cultivated diamond brand in Shuibei told reporters that the price of terminal cultivated diamonds has declined from the previous high, "but it is estimated that this price will not continue to decline, and the jewelry industry is approaching the end of the year. During peak season, prices may increase.”
As a terminal brand of cultivated diamonds, Zhang Dong, general manager of Yijixuan Jewelry, has been following the industry situation for a long time.
In an interview with a reporter from Securities Times·e Company, he also admitted that the terminal price of cultivated diamonds has indeed declined to a certain extent in recent months, but compared with the upstream, the decline is relatively slow.
Once upon a time, the high margins on the upstream production end of lab-grown diamonds were enviable.
According to the semi-annual report of Power Diamonds, the gross profit rate of the company's cultivated diamonds was as high as 83.44%.
In the third quarterly report disclosed by the company on October 26, not only did the company’s revenue and net profit decrease month-on-month in the third quarter, but the gross profit margin in the first three quarters also became 65.01%, of which the gross profit margin in the third quarter was 58.69%.
"For more than half a year, the price of rough cultivated diamonds has fallen rapidly, and the CVD method and the high temperature and high pressure method have fallen across the board. The decline has not only been cut in half." Zhang Dong mentioned that although the development of the cultivated diamond market is promising, the demand is also growing. However, the current demand-side increment cannot catch up with the supply-side capacity increase, so the industry has experienced periodic pains.
Li Bo also felt the sharp drop in the prices of rough-grown diamond products.
He believes that the general direction of the booming supply and demand of the cultivated diamond market is certain.
However, the international economic recession has led to a lower-than-expected demand. In addition, the investment boom at home and abroad has intensified in recent years. Both the CVD method and the high temperature and high pressure method have experienced a short-term concentrated release of production capacity, which has impacted the market as a whole.
"The downward price process in recent months is a process of fluctuations, and the fluctuations have not yet stabilized. It is still difficult to judge at which position the price can be balanced." Li Bo said.
Inventory pressure increases
Many people in the industry believe that the overall decline in the price of cultivated diamonds is nothing more than a change in the market supply and demand relationship.
The previous scene of "oversupply" in the industry is no more, and more and more voices are beginning to be alert to the emergence of "oversupply".
“As of 2021, lab-grown diamond manufacturers have maintained rapid growth in the form of full production and full sales (almost zero inventory). In fact, in the middle and lower reaches, with the phased completion of distribution in the global retail market, excess inventory has appeared in various links. , By 2022, manufacturers' inventories will appear and gradually accumulate, and full production and sales will no longer exist."
A person in the cultivated diamond industry, who did not want to be named, admitted that, as an emerging industry, there has been no authoritative statistical data on the actual production capacity and demand (especially the actual production capacity) of the cultivated diamond market.
The current market situation that can be understood is that the global demand for cultivated diamonds in 2021 will be around 10 million carats, and according to estimates, the global production capacity will exceed 20 million carats in 2021, which has essentially formed a surplus situation, but these excess production capacity is more redundant in the middle and lower reaches.
Since 2022, with the further release of expanded production capacity, the surplus situation has intensified, and the price reduction of rough embryos has far exceeded expectations.
In the face of still expanding production capacity and falling prices, intermediate underwriters (traders) are faced with a dilemma. The funds and risks they have to undertake to continue underwriting increase sharply, while they do not underwrite, and their inventories continue to depreciate.
Compared with the situation introduced by the above-mentioned people, Zhang Dong understands that the market situation is even less optimistic.
"The price of the cultivated diamond market was stable before, because there were large underwriters in the middle of the market. But since March this year, the underwriters have stopped accepting the goods. The market has broken away from the previous situation of short supply, and manufacturers have begun to fight price wars. , the price will naturally drop significantly." Zhang Dong said that according to relevant information, the total global production of rough cultivated diamonds will reach 23 million carats in 2022, which has doubled the production capacity quickly compared with a year ago.
However, he also mentioned that under the background that the price of cultivated diamonds has fallen sharply, there will be no more release of short-term market production capacity. It is also facing sales pressure, and there is no power to increase production capacity in a short period of time.
Pricing and settlement mechanism to be optimized
In the process of the overall downward trend in the price of cultivated diamonds, the large fluctuations in the international exchange rate have also exacerbated the uncertainty of market transactions, and the problem of the US dollar pricing of cultivated diamonds has become prominent.
“For a long time, domestic lab-grown diamond producers and traders have been pricing in US dollars, but settled in RMB. During the year, the US continued to raise interest rates to establish a rising channel for the US dollar, which intensified short-term exchange rate fluctuations and caused price chaos in the domestic lab-grown diamond market. In the interview, the above-mentioned industry sources who did not want to be named mentioned that since March this year, against the background of the devaluation of the RMB, the purchase cost of domestic cultivated diamonds priced in US dollars has increased, increasing the uncertainty of the price.
"Although exchange rate depreciation is beneficial to product exports, for the lab-grown diamond industry, which is priced in US dollars, it will not only fail to promote exports, but may inhibit exports." He explained that US dollar pricing makes lab-grown diamond exports unable to enjoy the benefits of RMB depreciation Moreover, in the context of a strong dollar, rough-grown diamonds are priced in dollars, which actually increases the export price and does not help to expand the export of domestically-grown diamonds.
Whether from the perspective of internal circulation in the domestic market or from the perspective of expanding exports to increase the share of the global industrial chain, dollar pricing is not conducive to the development of China's cultivated diamond industry.
In the interview, people from both upstream and downstream of the industry chain mentioned the impact of exchange rate fluctuations on production and operation in recent months.
Li Bo said that as a rough producer, when the US dollar appreciates against the RMB, the price of products in US dollars brings some dividends.
However, the recent fluctuations in the exchange rate have not kept pace with the decline in market prices.
For the production side, the overall market price of cultivated diamonds is still down.
As a terminal brand owner, Zhang Dong admitted that exchange rate fluctuations undoubtedly have an impact on terminal operations.
"Upstream purchases are denominated in US dollars, and the devaluation of the renminbi will undoubtedly increase the cost, and this fluctuation is uncontrollable."
"The global distribution pattern of the cultivated diamond industry chain is China's production (50% share), Indian cutting (95% share) and US consumption (80% share). The impact of distribution. In terms of promoting the development of the domestic market, it should do more harm than good." The above-mentioned industry source said on condition of anonymity.
The person said that the current domestic production-side automatic cutting and grinding equipment and technology are constantly developing, and the consumer-side market is also rising.
On a global scale, the importance of the circular development of China's cultivated diamond industry is growing, and the Chinese market will even determine the development level of the entire industry in the future.
The huge development prospects of the domestic cultivated diamond jewelry market provide a strategic opportunity for the internal circulation development of the cultivated diamond industry. Under this trend, RMB pricing can undoubtedly promote the operation and development of the domestic market.
The market still needs to be nurtured
During the visit to Shenzhen Shuibei Jewelry Market, the reporter of Securities Times·e Company personally felt that there are still a few merchants who have intervened or transformed into the field of cultivated diamonds from the jewelry field, and the wait-and-see atmosphere is still strong.
"Natural diamonds are wild, and cultivated diamonds are artificially cultivated, similar to cultured pearls and natural pearls." A store clerk in a store specializing in cultivated diamonds in Shuibei Market, so that customers who come to consult popularize cultivated diamonds and natural diamonds difference.
As a new thing, the first step in the sales of cultivated diamond brands to individual customers is to explain the similarities and differences between the products and natural diamonds.
During the visit, the terminal brand stores had different interpretations of the characteristics of cultivated diamonds, but they emphasized the consistency with natural diamonds.
In addition to the explanation of "relying on" natural diamonds, most of the shuibei-cultivated diamond merchants are also transformed.
A cultivated diamond store was previously mainly engaged in Moissanite diamonds, gold and silver jewelry and other whole categories of jewelry, mainly wholesale, and also engaged in retail, and also had its own production factory.
At the beginning of this year, the shop owner took a fancy to the market prospects of cultivated diamonds, and began to focus on cultivated diamonds and Moissanite diamonds, and has become a domestic e-commerce online celebrity live jewelry supplier.
Store B, on the other hand, only started to operate the wholesale and retail of cultivated diamonds in May this year. Before that, the owner had been operating natural diamonds for many years.
“If you just want to buy a diamond jewelry piece to wear, grown diamonds are really the first choice. They look as beautiful as natural diamonds, but at a much lower price, but if you want it to be collectible, etc., natural diamonds may be the right choice.” B The store manager said.
Although they are all diamonds, there are also "barriers" between cultivated diamonds and natural diamond merchants in the water shell market.
In the vicinity of several cultivated diamond stores in the market, there are several merchants specializing in natural diamonds, and the words "only selling pure natural diamonds" are prominently displayed on the signboards of the stores.
In a natural diamond store, when a reporter asked whether there were cultivated diamonds for sale, the owner said bluntly: "We don't do cultivated diamonds, and more and more will be cultivated, which will depreciate in the future, and the price will only get lower and lower. One less one, more and more valuable."
It is worth mentioning that although offline cultivated diamond transactions are relatively quiet, online transactions are hot.
The reporter saw online channels that some cultivated diamond shops sell a lot of products, and the user reviews are generally good.
"Our Taobao online sales are more than offline." A store owner who claimed to have operated natural diamonds for more than ten years before and now operates cultivated diamonds revealed to reporters that the online store information shows that the physical store is located in Shenzhen Shuibei Industrial Zone. .
"The domestic brands of cultivated diamonds are mostly online, and there are only about 20 offline brands. The development prospect of the cultivated diamond industry is definitely positive, but it needs a process. In China, which is the world's largest producer, it appeared some time ago. In order to avoid the embarrassing situation of rapid expansion of production capacity and tepid consumption in the retail terminal market, it needs to be improved urgently. At present, my country's offline demand for cultivated diamonds involves only about 200 million yuan a year. Compared with domestic cultivated diamond production capacity, It can almost be ignored and forgotten. The cultivation of the terminal market of cultivated diamonds still has a long way to go.” Zhang Dong, general manager of Yijixuan Jewelry, said.
Li Bo (pseudonym), the person in charge of upstream production enterprises, also mentioned that in the case of the general trend of industry development, the disturbance caused by the release of short-term production capacity is the inevitable result of market competition.
In the later stage, we still need to pay attention to the incremental situation on the demand side.
If there is a further improvement in the demand side of the domestic market, the price of cultivated diamonds may continue to rise, but the previous high gross profit may be difficult to achieve.