Diamond shortages driving ‘crazy’ rough prices

Joshua Freedman

India is experiencing a shortage of diamonds as rough supply has dropped and polished goods remain stuck at the Gemological Institute of America (GIA).

Traders are struggling to source rough, and face rising prices when buying from miners and at tenders, Indian manufacturers told Rapaport News [during the week Mai 31]. This has made it hard to meet strong demand from the US and China.

[Buying] rough has become difficult in the sense that people are paying crazy prices,” a manufacturing executive said on condition of anonymity. “You have demand, but you don’t have the supply of raw material.”

De Beers and Alrosa depleted their rough inventories in the first quarter, leading to unusually low availability in the second. De Beers has also reported operational challenges at some of its mines.

Several insiders expected a further price increase at De Beers’ June sight [during the week of June 7]. Meanwhile, buyers are turning to tenders to plug shortages, lifting prices there to significantly above the large miners’ levels, sources explained.

Over the past two sights, both Alrosa and De Beers have sold fewer goods [than earlier in the year],” a sightholder commented. “Their mining is also not very high. When I speak to them, they really don’t have the goods that they can put on sale, especially in 4 grainers [1-carat rough] and up.”

The upcoming sight, which [began on Monday June 7, would] see proceeds similar to last month’s $380 million, dealers estimated — down from $663 million, $550 million and $450 million in the miner’s first three sales of the year. The combination of solid demand and limited supply means customers will snap up the merchandise, the sources added.

I wouldn’t say that polished demand is completely bonkers, but you’ve got quite a destocked pipeline and…a restriction in rough coming in,” an insider observed. “These things together have [put us in] this…position.

Reduced operations during India’s Covid-19 outbreak have exacerbated the polished shortfalls. While manufacturing and exports have been allowed to continue, factories and offices in India are limited to 50% of staff members. Many polishing workers have been sick or in quarantine, or have returned to their hometowns.

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Source Rapaport