Global diamond output may decline this year: De Beers

Global diamond output is likely to decline in calendar year 2018, due to suspension of excavation by leading producers.

A report from De Beers Group, largest supplier of rough diamonds, says the Alrosa-owned Mir mine (in Russia) suspended operations this year. Also, Rio Tinto has forecast a fall in its production.

“Production is expected to continue falling as new projects and expansions fail to replace lost output from closing mines. By 2028, several large mines will reach the end of their life, while only a few new projects are in the pipeline,” said the report, issued on Thursday.

Prices might remain elevated in the current year on lower production estimates and growing consumer demand on a recovery in the global economy, it said.

Global production rose 14 per cent to 164 million carats for calendar year 2017 from the previous year. Total rough diamond production value was estimated at $17.5 billion, a 15 per cent increase over 2016.

De Beers accounted for the largest increase in production volume (6.1 million carats), followed by Rio Tinto (3.7 million) and Alrosa (2.3 million). Russia retained its position as the largest producer country in carat and value terms, the report said.

Sales of rough (‘roughs’) diamonds to cutting centres in the first half of 2018 were higher than the same period in 2017. Russia’s Alrosa destocked 7 million carats in the first half to report an 8 per cent increase in revenue from roughs.

While De Beers’ sales were lower in volume terms, sales values to cutting centres were maintained by higher prices and an improved mix.

Sales of roughs to cutting centres was $16.6 billion in 2017, a 2 per cent increase from 2016. De Beers remained the largest supplier, but with a reduced share of 34 per cent (from 37 per cent in 2016). Alrosa’s share also decreased in 2017 to 25 per cent of total sales (from 27 per cent in 2016).

In India, trading conditions continued to stabilise in 2017 after the short-term disruption from demonetisation. Reflecting the higher level of rough production, India’s annual gross rough diamond import volumes increased to 195 million carats.

The effects of demonetisation had largely diffused by the end of the first quarter (Q1) in 2017, leaving manufacturing and stock conditions stable.

Also, initial concerns over the 3 per cent Goods and Services Tax (GST) on polished diamonds, introduced in mid-2017, dissipated when the GST Council reduced the rate on diamonds and precious stones to 0.25 per cent in early 2018.

“After a positive Q42017, selling season, the midstream continued experiencing strong manufacturing demand at the start of 2018. However, businesses in this sector will need to continue adapting to the evolving landscape,” said the report.

De Beers said it hoped the Millennial and Gen-Z generations would continue to boost demand.

They accounted for twothird of global diamond jewellery sales in 2017, with demand at a new record high of $82 billion.

Millennials are between 21 and 39 years, representing 29 per cent of the world’s population; they are the current largest group of diamond consumers.

They accounted for almost 60 per cent of diamond jewellery demand in the US in 2017 and nearly 80 per cent in China.

Gen-Z, those currently aged up to 20 years, represent 35 per cent of the world’s population and will come of age as diamond consumers over the coming decades.

De Beers also hopes the blockchain technology under development would help improve overall diamond and jewellery sales in the years to come.