Diamond supply shrinking even as demand grows: DeBeers
17 Sep 2014
The DeBeers diamond cartel warned on Tuesday that global production of the adamantine carbon will decline from 2020, amid a dearth of new finds.
The trend would probably spell higher prices for buyers of jewellery, as production from existing sources might not keep up with ever-increasing demand from the United States, China and India, the cartel said.
"Unless major new discoveries are made in the coming years, supply can be expected to decline gradually from 2020," De Beers said in Hong Kong, forecasting rocky times ahead for the $85 billion a year industry.
Existing mines in Botswana, South Africa and Namibia are becoming depleted and the need to dig deeper has made operations less profitable.
Of course India's historically famed Golconda mines, once the world's only known source of diamonds, have long been cleaned out. But the last major diamond discovery came a decade ago in India, at Rio Tinto's yet to be completed Bunder project.
De Beers said exploration has now turned to Angola, the Democratic Republic of Congo, Zimbabwe, Arctic Siberia and Canada.
The supply shortage, though bad news for buyers, might not necessarily be so for the Luxembourg-based DeBeers, which accounts for around 33 per cent of global rough diamond sales.
This is because demand from the United States, the world's largest market for diamonds, and a growing appetite for the gems from China and India's middle class, will likely create a seller's market.
"Even under scenarios of volatile or weaker global economic growth, the demand for diamonds is expected to show positive real growth in the next decade," De Beers said.
China has the fastest growing demand, jumping to a share of about 15 per cent of the world's diamond market from less than three per cent in 2003.
But it is not expected to overtake the US market's 40 per cent share for more than a decade, De Beers chief executive officer Philippe Mellier said.
"China and India, the engines for growth, these two big markets clearly could be as big as the US in the next maybe 15 years," said Mellier, who was in Hong Kong for the Jewellery and Gem Fair.
"For China to go up to 40 per cent share of the world market, it's still some ways to go," he added, saying he expects the Chinese market to grow more than 10 per cent per annum for "many more years".
De Beers said China's anti-corruption drive, which has hurt demand for luxury goods, would not affect the diamond industry.
"I think our business is less impacted by that compared to others," Stephen Lussier, chief executive of De Beers Forevermark said, with diamonds usually used at weddings and other "emotional events" in life.
Global diamond jewellery sales were around US$79 billion in 2013, up 3 per cent from 2012, according to De Beers' first Diamond Insight Report.
Sales are expected to grow in the long term, helped by recovery in the US economy as well as the growth of the middle class in the developing markets of China and India.
The company had said earlier than it expects "good to very good" second quarter results in India, which has seen increasing demand for diamonds.
Founded in 1888 in South Africa, De Beers last year reported $1 billion in operating profit, more than double that of 2012.
