Diamonds lose shine on excessive mining

Abody representing eight leading global diamond mining companies has warned against excessive mining of the gem, saying this has led to a drop in the prices of the precious stone. It also said that the current scenario in India is not rosy.

Last year mines produced 150 million carat rough diamonds globally, which was the highest since 2008, when the output was 163 million carat. The all-time high is 177 million carat, reported in 2005.

At present, unpolished or rough diamonds prices are softening and the macro-scene is "not that promising, though it is not bad either,” said Jean-Marc Lieberherr, chief executive officer, Diamond Producers Association (DPA), which represents the companies — such as Alrosa and De Beers — that mine 75 per cent of the diamonds produced globally. Strong dollar and equities, too, are taking the shine away from luxurious assets like diamonds.

It is planning to bring down the production to a third of the current levels in a decade to ensure that a diamond gets its “true value”.

The impact of excessive diamond mining could also be felt in India, where 85 per cent of the world’s rough diamonds are polished. Speaking with Business Standard, Jean-Marc said: “Polished diamonds prices in India has also remained soft, and polishing units and companies are keeping inventories based on their needs

and to only meet immediate demand.” The companies are “very cautious” in replacing inventories, he said.

“Confidence is down ahead of the (general) election. Consumer demand for luxurious assets like diamond-studded jewellery usually remains low during elections. However, it is not disastrous as India has huge potential for expanding local sales... its local sale as a share of the global market will significantly go up from 6-7 per cent, now,” he said, but maintained that prices of rough diamonds will remain soft in this year.

The DPA has also commissioned a study to S&P Global, which is coming out with research to quantify benefits of diamond mining on ecology, economic and social lives, and to the government in form of taxes, etc, and impact of employees of the mining companies. It is also going to launch a campaign with an aim to help Indian units identify synthetic diamonds. For this, it is working with Indian stakeholders, including the Gem and Jewellery Export Promotion Council.

The Indian gems and jewellery sector is currently facing poor sales, working capital crunch and the impact of the overall global slowdown in the demand of luxurious assets.