Rough diamond prices likely to increase as De Beers, ALROSA tighten supply

Mathew Nyaungwa

Rough diamond prices increased by more than 20 percent each year since the post crisis era as producers struggled to keep pace with demand. However, this changed last year when prices eased by 16 percent, according to data compiled by WWW International Diamond Consultants. Polished prices were also not spared by the tide.

The RapNet Diamond Index showed 1-carat diamond prices fell over 12.5 percent while 3-carat diamonds fell more than 11 percent.

Metals and mining analyst with Laurentian Bank Securities Éric Lemieux said sustained economic hardships in several parts of the world as well as China and India’s relative slow down had caused a negative impact. He said the dismal global economic climate was having its toll on the robustness of demand.

Diamonds are luxury items that do not necessarily fare well in a recession and speculative purchases of gems have been dropping,” said Lemieux in an interview with Investor Resouces.

On the supply-side, mining operations are getting more and more difficult to permit and environmental constraints and social acceptability being key challenges beyond the typical geological parameters.

“If there are signs of improvement in the U.S. economy, combined with China’s and India’s growing middle class, global diamond demand may eventually put pressure on the depleting diamond production supply-base.”

High rough prices

Rockwell Diamonds said recently that with improving diamond prices since the beginning of November 2012, the market was positioned to increase by a few percent in 2013.

This view, it said, was supported by good interest at the Hong Kong show in November 2012 and increased attendance at open market tenders.

Reflecting this trend, Rockwell also experienced higher attendance at its closing tenders for 2012 supporting higher prices and providing some evidence of a more stable market than in previous years,” the miner said.

De Beers also said late last year that it expected stable production in 2013, thereby pushing prices high.

The supply is going to be constrained next year so we have an opportunity for further price growth in 2013,” chief executive Officer Philippe Mellier said in an interview with Bloomberg Television last month.

This year [2012] we’re going to produce around 27 million, we will be around that number next year.”

He also said that growing Chinese demand would help bolster prices this year.

Anglo American said Chinese and Indian demand accounted for about 20 percent of global diamond demand in 2012 and that share was expected to rise to 28 percent in 2016 as the diamond market grows from $23 billion to $31 billion.


A Rapaport research report released this month noted that manufacturers who gained slightly better profit margins in December, expressed concern that De Beers and Alrosa might raise rough prices in the first quarter as they continue to limit supply.

However, group chairperson Martin Rapaport said that forecasts for pending diamond price increases were premature.

He said that the jewellery trade should be careful not to inflate prices by buying diamonds on credit.

Given expectations that the fiscal cliff will reduce demand for luxury products due to higher taxes, increased unemployment and reduced government spending, responsible companies should refuse to buy diamonds at prices that do not allow for healthy profits,” he said.

Buyers should just say no to high prices. The real value of diamonds must be based on real money from real buyers.”

Source Rough&Polished