Why miners still forecast a supply-demand gap.
In the last month, we have seen a few notable reports on the diamond industry. Here are some highlights:
– The supply/demand imbalance: The dream never dies.
Alrosa’s June presentation is the most bullish of the bunch, with the Russian diamond producer estimating that demand will rise 2 to 4 percent over the next few years. The United States, the largest market, will show moderate growth of 3 to 4 percent, it says.
However, diamond production has been relatively flat since 2009, it notes, and it expects production to increase only at a 2 percent compound annual growth rate (CAGR) until 2025.
Which means we could see the much-talked about—and much-delayed—supply-demand imbalance come about in 2019.
– Dominion sees growth on the low-end.
Dominion Diamond’s presentation and conference call this week also brings up the supply-demand differential, expecting diamond jewelry demand to grow at 3.4 percent CAGR. But it says a lot of that growth will be in lesser-quality goods, crunching numbers from Rapaport.
“Democratization of diamond jewelry and resilience of mass-market jewelry has led to stronger price trend in lower-quality polished diamonds,” it says. “Polished diamonds in lower colors (e.g., K–M) have outperformed better colors (e.g., D–F) Better clarities (IF–VVS) have shown weaker price performance than lower clarities.”
– ABN AMRO plays the spoiler. (There’s one in every crowd.)