Small natural diamonds are showing the first meaningful signs of a turnaround after years of pressure, as shrinking inventories and deep production cuts begin to tighten global supply and lift prices.

New data from Rapaport indicates that the recovery is most visible in smaller-sized stones, where availability has dropped sharply following widespread reductions in mining output. The Rapaport Trade Diamond Index (RAPI™) recorded a 2.1% increase in prices for 0.30-carat diamonds in May, while 0.50-carat stones gained 0.9%, signaling renewed momentum in categories that had been among the hardest hit during the industry’s prolonged downturn.

The rebound comes as inventories continue to thin. According to Rapaport, listings of 0.30-carat diamonds on its trading platform have fallen by more than half since the start of the year, creating supply constraints that are beginning to support pricing. Industry sources also point to growing interest from luxury jewellery brands looking to secure smaller natural diamonds at valuations still considered attractive by historical standards.

The recovery, however, is far from uniform. Larger stones remained under pressure in May, with prices for 1-carat diamonds slipping 0.3% and 3-carat stones easing 0.5%. Yet the market for premium larger diamonds appears relatively resilient, with 3-carat goods still trading only modestly below year-earlier levels.

Recent trading activity at the JCK Las Vegas show underscored the divide within the market. Dealers reported strong demand from US buyers for diamonds weighing two carats and above, particularly for elongated fancy shapes, antique cuts, and lower-colour stones. In contrast, smaller commercial diamonds continued to face stiff competition from lab-grown alternatives, which have gained market share in entry-level jewellery segments.

Demand for rare and high-value gems remains robust. Traders at GemGenève reported healthy interest in exceptional diamonds and coloured gemstones, while India’s retail jewellery market continued to provide support for natural diamond sales despite broader economic uncertainties.

Looking ahead, the supply side may become an even bigger story. Rapaport expects global diamond production to contract further as mining companies grapple with weak profitability and financial strain. Recent developments include restructuring efforts at Petra Diamonds’ Finsch mine, uncertainty surrounding operations at the Kao mine, and insolvency protection proceedings involving Arctic Canadian Diamond Company, owner of the Ekati mine.

For the natural diamond industry, the emerging equation is becoming increasingly clear: fewer diamonds entering the market may finally be creating the conditions for prices to recover.