De Beers started the year of 2016 on a positive note. They sold US$540 million worth of rough diamonds for the first sales cycle (global sightholder sales and auction sales), marking a significant increase over US$248 million in its December 2015 sales.
According to the company, a positive holiday season in the United States from a retail perspective, low levels of rough diamond purchases by the midstream in Q4 2015 and a subsequent reduction in manufacturing saw polished diamond stocks pull through the pipeline. This has resulted in firmer polished prices. Rough diamond demand broadened across the entire product range as cutting and polishing factories began to increase their activities.
From its parent company Anglo American, the overall rough diamond production in 2015 decreased 12 percent to 28.7 million carats as the miner reduced rough output in response to the market downturn. Lynette Gould, spokesperson of De Beers, told Hong Kong Jewellery that they have trimmed the overall production in Botswana. In Canada, the Snap Lake mine has been put on extended care and maintenance with effect from the beginning of 2016. In Namibia, their largest offshore marine mining vessel is remaining in-port for the reduction of production level; and they are implementing plans for reduced mining grade with other vessels. In summary, their production for 2016 will be between 26 million to 28 million carats.
“Clearly there were a number of challenges that have affected the industry in 2015. We have taken decisive actions across the value chain to provide sustainable solutions and help rebalance rough and polished trading conditions,” Gould said.
When the difficult situation on the market became apparent last year, Russia-based Alrosa which is the world’s largest diamond producer in terms of carats has reduced the supply level to avoid further overstocking in the midstream, adjusted prices accordingly, and deferred long-term sightholders’ significant amount of goods without any penalties. In the first nine months of 2015, they have cut rough prices by 15 percent, and stockpiled rough inventory rather than curbing the production. As a result, Alrosa saw a total of 38.3 million carats of rough diamonds in 2015, a six percent year-on-year increase. According to the company’s public relations department, the current inventory is a valuable asset that can be sold if the market situation improves. They are confident with the revenue from rough diamond sales in 2016 and plan to fetch at least US$3.4 billion.
They also stated that large practitioners, primarily diamond miners, should be conscious of their responsibility for the future of the industry and act on the basis of long-term benefits, for the market’s stability and recovery. “Since the end of last year we have seen the first signs of market stabilisation, and now the development is moderately positive,” the representative added.
“Positive demand growth for diamonds will almost certainly outstrip the growth in carat production, given the lack of major new discoveries in the last decade and the projected slowdown in several existing mines,” Lynette Gould of De Beers estimated.
She forecasts that two main measures will help the industry achieve its full potential. One is safeguarding and nurturing the diamond dream – the allure that diamonds have for customers, based on their association with romance and the fact that they are seen as a lasting source of value. The other is for companies across the value chain to innovate and differentiate, to take full advantage of opportunities created by the expected growth in demand. It includes the investment in branding, marketing, and the production to drive innovation and productivity in diamond supply.
For Alrosa, their previous strategies have been proven to be effective, and they will adhere to them in 2016, said the spokesperson. The company also maintained a conservative forecast regarding the state of the market: rough prices will be stable this year, and the period of decline has already passed. It is vital for practitioners to keep patient and prevent taking hasty steps to avoid sharp price spikes which will unbalance the market again.
“In order to ensure the development and growth of the market for the long term, we all need to think about stimulating customer demand for diamonds. Our industry entirely depends on the willingness of consumers to purchase natural diamond jewellery,” the representative expressed.
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