Rough supply signals shift in balance of power – Insights

| January 31st, 2017

Rough supply signals shift in balance of power – Insights
"Rough supply signals shift in balance of power – Insights"

Profit is the new turnover in the diamond trade. As retail inventory levels continue to shrink due to recession-driven efficiencies, the trade has had to change its mindset. No longer can diamantaires play the high-volume production game: they have to do more with less.

It seems 2015 provided the wake-up call which enabled a more profitable trade this year. Some credit, though not all, can be given to the mining companies who carefully limited supply this year.

Still, with the final sight of the year now over, De Beers sales rose an impressive 36 percent to about $5.83 billion in 2016. While in the past that would have triggered the uncomfortable sense the “syndicate” is profiting at the expense of the trade, this year feels a little different.

The disproportionate correlation between rough diamond prices and their polished counterparts was less extreme than in previous years, even as it still exists.

“Things changed in the last 18 months as manufacturers refused to buy overpriced rough in the second half of last year and mining profits slumped as a result.”

De Beers rough index fell 5 percent in 2016 following a 15 percent correction last year. Meanwhile, polished prices, as measured by the RapNet Diamond Index (RAPI™) for 1-carat diamonds, dropped 2.8 percent in the 11 months to November, after firming 5.8 percent in 2015.

De Beers Sales Graph

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Source Rapaport


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