De Beers expects tough year
THIS year promises to be a tough one for the global diamond industry because of “indigestion” in the mine-to-market pipeline caused by excess inventories, De Beers says.
THIS year promises to be a tough one for the global diamond industry because of “indigestion” in the mine-to-market pipeline caused by excess inventories, De Beers says.
In its 2015 Diamond Insight Report, De Beers, the largest supplier of rough diamonds by value, making up 34% of international sales, outlined its views of supply, demand and the jewellery market for this year.
Diamond jewellery demand was weaker than expected at the end of last year, a key buying period, because of unfavourable exchange rates and slowing emerging market economies, which meant excess inventory in the pipeline this year, it said.
“This led to a period of ‘indigestion’ in the diamond value chain and as a result we expect 2015 as a whole to be a more challenging year,” De Beers CEO Philippe Mellier said.
“In 2015, while there may be growth in local currency in some markets, the continued strengthening of the US dollar against all major currencies, coupled with a slowdown in economic growth in China, is likely to lead to global diamond jewellery demand for the full year being relatively flat compared with 2014 levels.”
Global diamond jewellery sales rose nearly 3% last year to a record $80bn despite a slowdown in the second half because of a firming dollar against the currencies of key diamond-consuming countries. Global diamond production volumes fell 3% last year to 142-million carats. But firmer prices last year meant this production was valued at more than $19bn, 6% higher than the previous year.
The report noted that diamond flow from the Marange diamond fields in Zimbabwe had more than halved to 5-million carats. Rough diamond sales last year topped $20bn, a 12% rise compared to the previous year.
Less demand for polished diamonds was “likely to have an impact on overall rough diamond production this year”, the report said.
De Beers has slowed output, adjusting to a weaker market and subdued prices this year.
Johan Dippenaar, CEO of Petra Diamonds, said last week rough diamond prices were expected to remain under pressure and volatile for the balance of this year to end-December.
“From talking to our clients, we feel things will sort themselves out during these six months to December and we’ll see a more stable market in January to June. I don’t suggest it will roar away, but it will probably experience stability.”
De Beers expects diamond output to plateau by the end of this decade despite the start of two mines in Russia and one in Botswana last year and another built by Alrosa in Russia coming into production this year.
There are two mines due to start production next year, with De Beers and its partner starting the 4.5-million carat a year Gahcho Kué mine in Canada.
Output would flatten and then plateau from 2020 as production started falling at many existing mines, the report said.
Woes caused by low diamond prices were echoed in a quarterly production report issued by Rockwell Diamonds yesterday, which said the average prices it sold at during its second financial quarter were 24% lower at $1,791/carat for stones from its company-owned mines than in the matching period last year.
Diamonds from its Remhoogte Holsloot Complex were sold at an average $1,371/carat during the three months ended August. But in the first week of September, RHC prices rebounded to expected levels of about $2,200.