by Greg Klein | September 21, 2015
As the world’s largest seller of rough diamonds, the De Beers Group obviously likes to see positive forecasts for the gems. The company came through with its own optimistic outlook in this year’s Diamond Insight Report, released September 21. The global giant concedes that 2014’s weaker diamond demand pushed oversupply into 2015, which remains a challenging year. Even so, it’s “undeniable that the fundamentals of the sector remain attractive,” insists CEO Philippe Mellier.
Despite demand dropping off in the latter months, diamonds had quite a year in 2014. Rough sales increased 12% to more than $20 billion. Diamond jewelry sales grew 3%, surpassing $80 billion for the first time. Global rough production by carat dropped 3% but output by value rose almost 6% to more than $19 billion.
While still optimistic about long-term demand, De Beers sees little new supply. Three new mines came online last year with Lukoil’s Grib and ALROSA’s Karpinskogo-1, both in western Russia, and Gem Diamonds’ Ghaghoo in Botswana. Earlier this year ALROSA began commissioning a fourth new mine, Botuobinsky in Siberia.
“The greenfield diamond project pipeline remains sparse, however.” Suppliers have just two large-scale projects under construction: the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture in the Northwest Territories and Stornoway Diamond’s (TSX:SWY) Renard project in Quebec. Other projects cited by De Beers include ALROSA’s Verkhne Munskoe pipe, scheduled for 2018 production, and Rio Tinto’s (NYE:RIO) Bunder project, slated for 2017, while expansions and extensions are planned for other brownfield sites. But for some reason De Beers bases its statements on info that’s at least 16 months old.
New mines and brownfield expansion are “expected to lift total carat production to levels similar to the mid-2000s but, owing to the mix of new diamonds mined, value growth is expected to be less pronounced.” Towards the end of the decade, “overall supply is likely to plateau.”
Meanwhile, De Beers portrays India as a market of exceptional potential and a society where diamonds have “always had an intrinsic appeal” to women. Unlike Westerners, very few Indian men proffer a diamond along with a marriage proposal. Instead, they “display their love with gifts of diamonds on different occasions during the marriage.”
To offer suppliers more insight into this market, De Beers researched 40,000 Indian women. The results, which Indian men just might be interested to read, take up more than half of this year’s report.