Diamond demand to grow over 6%annually over next decade: Bain & Company

In its recent report Bain & Company has noted demand for diamonds will exceed diamond supply in the decade until 2020, which will not be able to keep balance owing to the lack of new mines, reports say. The growing prosperity in Chinese and Indian markets are predicted to propel the global demand at an annual rate of 6.4 percent to nearly 250 million carats and 6.6 percent in value terms by 2020.

On the supply side, the report notes that rough diamond supply is expected to grow at a compound annual growth rate of 2.8 percent globally in carat terms, and 3 percent in volume terms. Despite banking on upcoming projects to be onstream in the short term, the relatively flat growth towards the end of the decade, lack of any major new deposit being discovered since Murowa in Zimbabwe in 1997 and even if new discoveries were made then the wait of a decade before the first diamonds are sold, all point at strained supplies for the decade until 2010.

The report points out that the unbalanced demand and supply equation would affect prices of polished diamonds to increase. The major consumer strate to be hit would be the lower end consumer who could be prompted to look at other gems of altogether different product categories. The rich and super rich who indulge in 2 carats and above will least be affected. The rise in prices would not affect the 2 carat plus diamond sales, as they account for 5 percent of diamonds produced but 50 percent of the value of sales. Rising price volatility could be supported with investment in diamonds, although this continues to face issues of valuation, the lack of a spot market and a lack of liquidity. Bain reported that the industry efforts to increase transparency could help attract investors to individual, high-end polished gems.