Is Diamond Industry Losing Grounds?

De Beers recently delivered somewhat alarming report which may have disappointed the global diamond lovers. In its first annual ‘Diamond Insight Report’ released in September 2014, De Beers has stated that growing diamond demand would almost outstrip growth in carat production because of the lack of major new discoveries of diamond mines in the last decade and the diminishing production in several existing mines.

The report states that a moderate growth in supply would not be able to meet the ever increasing demand up to 2020 after which unless major new discoveries are made in the coming years, the diamond supply may decline gradually. Mr. Philippe Mellier, Chief Executive of De Beers Group, commenting the findings of the report says, “The global diamond demand remains the one true source of value for the industry. With demand prediction to increase further from 2013’s record level, the opportunity for further growth is clear. But this must not be seen as cause for satisfaction. The diamond industry would continue to lose grounds to other categories if the industry players do not invest significantly in production, marketing and advancement of technology.”

The global demand for diamond jewellery reached to a record height of USD 79 billion in 2013 thanks to the rapidly growing preferences for diamonds in China and India. China is the world’s fastest growing market for diamond jewellery where the number of diamond jewellery retail doors have increased by almost 30% between 2010 and 2013, states the report. India and China both have witnessed their domestic diamond jewellery demand grow by a Compound Annual Growth Rate (CAGR) of 12% from 2008 to 2013. Market of polished diamonds in the US grew by 7% in 2013. Keeping this trend in mind, with the continuous recovery of the US, the global diamond demand is expected to keep on growing over the long-term.

On the other hand, the World Diamond Mark Foundation (WDM) is about to launch generic promotion of the diamond very soon to create global awareness and to increase demand of diamond. This initiative, if proved successful, would surely boost the existing growth rate of the global diamond market. But, as mentioned in the De Beers’ report, with the global diamond production diminishing and the demand increasing, a time would come in near future when the demand would almost outstrip growth in carat production.

So, as an obvious solution, exploration expenditure “is expected to go high with the chase to discover the next major source of diamonds,” the report states. Most of diamond exploration today takes place “in underexplored African countries like Angola, the Democratic Republic of Congo (DRC), Zimbabwe and the vast swaths of arctic Siberia and Canada.”

Now, as far as De Beers’ findings of widening gap between diamonds supply and demand as well as exploration of new mines are concerned, there’s nothing new about it. I have been hearing this alarm since last 3-4 years during my talk with various global industry leaders. The industry is well aware of this fact.

To sum up, the De Beers report indicates that diamonds would remain forever even if the production goes down drastically in comparison with the demand, but the diamond lovers will have to be mentally prepared pay a heavy increase in the prices of the ever-shining stones in future because of its short supply!

Posted by Suresh Chotai