23 Jul 2019
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ROUGH & TOUGH
LOWER PRODUCTION TO RAISE ROUGH PRICES
By: Diamond World News Service
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Apr 29 2019 2:58PM
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Reference: 18185  

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Diamond prices have been weak over the last five years while production costs have been higher, reducing the economics of projects. Add to this mix, a reduction in production and escalating demand for diamond jewellery, which has increased on average by 4 per cent since 2010, the impact on prices is inevitable.

“A significant decrease in global diamonds supply is expected in 2020 and onwards. Certainly lower supply and continued demand for diamond jewellery will provide upwardpressure on stones prices,” confirms Takhiev.

Lower production in the face of strong demand is bound to push up prices. But when?

“With rising cost inflation and mine production down, suppliers are under pressure to raise prices. By the second half of 2019, when the issue of oversupply of smaller diamond categories is expected to normalise, rough prices should rise,” Zimnisky predicts.

However,despite the forecast of higher rough prices from a reduction in production, miners do not expect any material impact on availability, which would be backed up by diamond stockpiles.

“Although, we do not hold sizeable inventories of rough diamonds, the business maintains a working inventory of 1.5-2 sights’ worth of rough diamond supply in order to ensure our ability to provide customers with consistent supplies of rough diamonds from one sight to the next,” reveals Johnson.

True, stock with miners will protect the industry, but only for so long. “We started 2018 with 18 million carats of stocks, produced 36.7 million carats, sold 38 million carats, and ended the year with 17 million carats. We cannot divide fresh / non-fresh diamonds, but from the numbers you can deduce that give or take, half of annual sales during the year is sold from stock, and half from output,” elaborates Takhiev.

As production falls in the coming years, how long will stocks support the industry, in the face of rising demand, especially in India and China?

States Jean Marc Lieberherr, “By 2030, we believe there will be a much larger demand for diamonds from both China and India, but annual production will be down to about 100 million carats, as no new mines have been discovered in recent times. Production won’t rise in the near future, as it takes 10 years to identify a mine and another five years to begin operations in the area.”

Prices of rough will certainly strengthen throughout the convoluted segments of the diamond supply chain. And no one but the end consumer shall rise to protect the stature of the diamond as a luxurious asset!

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