Speaking during the Guangzhou International Jewellery and Diamond conference, Zimnisky said the market glut was on track to correct as long as global demand for diamonds did not significantly fall on the back of some major negative macroeconomic event.
"In general, I think the industry could come out of the current malaise in a more sustainable position as industry-wide inventories will likely be much more manageable going forward, leading to a healthier supply/demand balance," he said.
According to Zimnisky, the diamond industry was still trying to "find its footing" in the post-De Beers monopoly era, as demonstrated by three notable industry downturns in just the past 10 years, including 2009, 2015, 2019.
Elevated supply most recently had come from new diamond production that came on line in the 2016-2017 period. "These production decisions were likely made after diamond prices made an all-time high in 2011, which made the economics of the diamond mining business look robust," Zimnisky said.
"In addition, the mid-stream segment of the industry has been deleveraging for at least the last two years as the fundamentals of that business are changing. This has also contributed to an oversupplied market downstream in a very significant way."
The New York-based analyst said the most significant near-term challenge for the industry was the demand factor which would be impacted by a potential escalation or lack of resolution of the US-China trade dispute, particularly since the US and China were the two most important consumer markets.
He also fingered the trend of very low and negative interest rates globally as a major concern. An added risk was monetary policy experiments by the largest central banks that could directly impact global economic health and consumer spending power and sentiment, which would negatively impact consumer demand for diamonds.
In the long run, Zimnisky said the most significant risk to the diamond industry was insufficient or ineffective marketing.
"The industry is more fragmented now, and the incentive has shifted from a larger, category-marketing strategy to many brand-specific campaigns. As a result, branded diamond jewellery items have performed quite well in recent years, but in general, consumer perception of diamonds as a luxury product category has seemed to have lost lustre," he said.
"I believe successful marketing by the natural diamond industry is also the only real solution to the threat of man-made diamonds."