ET BureauDiamond is probably the only luxury item whose price has been increasing, unlike bullion and other commodities, which have fallen recently to multiyear lows. And it’s likely to lustre on, Paul Rowley, EVP DeBeers Global Sightholder Sales, tells ET’s Ram Sahgal, because of the US economic recovery and continued growth in China and India. DeBeers produces around 33% of the world’s rough diamonds by value. Edited excerpts:
We hear that rough diamond prices have risen significantly over the past two years. How much have they risen by and is DeBeers planning to raise roughs production?
Between the middle of 2013 and of 2014, rough prices saw a mid-single digit increase. De Beers’ production is expected to be around 32 million carats in 2014 (31.1 million carats in 2013).
What has been the impact of rising rough prices on polished diamonds in India and globally?
The diamond industry has a seasonal demand pattern and prices of rough and polished diamonds can see increases and decreases during the year depending on several factors.
Prices of polished diamonds increased earlier in 2014 as retailers restocked their inventories after the positive sales environment during the end-of-year selling season. Although polished prices are currently slightly lower than earlier in 2014, the expectations are for good consumer demand for diamond jewellery in the major retail markets over the end-of-year selling season and we believe this will see an increase in demand for polished diamonds in the near future as retailers see a growth in their diamond jewellery sales and then look to restock once more after the key end of year season.
The global economy hasn’t recovered fully from the recessionary fallout. Diamond is probably the only luxury item whose price is rising amid a fall in bullion and other commodities to multi-year lows. Where is the demand for polished diamonds coming from and what is your outlook for the industry?
Global consumer demand is forecast to grow at an average of 4-5% in US dollar nominal terms between 2013 and 2018, driven by the effect of the US economic recovery and the continued growth of emerging markets, especially China and India. A positive supply demand outlook is shared by a number of external experts. RBC said that in their Diamond Digest in March this year that demand is set to strengthen rapidly, determined by the recovery of consumer confidence in the US, and China as penetration of diamond jewellery pieces increases among the growing middle class there.
Is De Beers planning to buy more mines or bolster production from existing ones?
We continue to invest billions of dollars for production growth with projects in South Africa, Botswana and Canada. In South Africa, we have begun a project to take Venetia mine (South Africa’s largest diamond mine) underground; this will extend the mine life beyond 2040. In Botswana, we are investing in the Cut-8 extension at Debswana’s Jwaneng Mine that will extend the life of one of the world’s richest diamond mines to at least 2028. In Canada, we have a joint venture with Mountain Province Diamonds to build a new mine — Gahcho Kue in the Northwest Territories — that will commence production in late 2016 with a life of mine of some 11 years.
How is the industry coping with the threat from cultured or lab made diamonds?
Man-made diamonds are not, in themselves, a threat to the diamond industry as they are completely different propositions.
Extensive research we’ve carried out over the years has told us that consumers see natural diamonds as emotionally significant in a way that synthetics are not and they want the real thing to mark important occasions in their lives. The view from consumers is that you cannot create forever in a lab.
Are there going to be major changes in the Sightholder policy or have these already been instituted?
Earlier this year, we communicated an updated approach for the new three-year supply contract with Global Sightholder Sales. The new contractual period involves more flexibility in purchasing opportunities and requires customers to meet new, more rigorous financial compliance requirements. We believe the new contractual period will strengthen the confidence of all stakeholders in the diamond industry.
We hear that rough diamond prices have risen significantly over the past two years. How much have they risen by and is DeBeers planning to raise roughs production?
Between the middle of 2013 and of 2014, rough prices saw a mid-single digit increase. De Beers’ production is expected to be around 32 million carats in 2014 (31.1 million carats in 2013).
What has been the impact of rising rough prices on polished diamonds in India and globally?
The diamond industry has a seasonal demand pattern and prices of rough and polished diamonds can see increases and decreases during the year depending on several factors.
Prices of polished diamonds increased earlier in 2014 as retailers restocked their inventories after the positive sales environment during the end-of-year selling season. Although polished prices are currently slightly lower than earlier in 2014, the expectations are for good consumer demand for diamond jewellery in the major retail markets over the end-of-year selling season and we believe this will see an increase in demand for polished diamonds in the near future as retailers see a growth in their diamond jewellery sales and then look to restock once more after the key end of year season.
The global economy hasn’t recovered fully from the recessionary fallout. Diamond is probably the only luxury item whose price is rising amid a fall in bullion and other commodities to multi-year lows. Where is the demand for polished diamonds coming from and what is your outlook for the industry?
Global consumer demand is forecast to grow at an average of 4-5% in US dollar nominal terms between 2013 and 2018, driven by the effect of the US economic recovery and the continued growth of emerging markets, especially China and India. A positive supply demand outlook is shared by a number of external experts. RBC said that in their Diamond Digest in March this year that demand is set to strengthen rapidly, determined by the recovery of consumer confidence in the US, and China as penetration of diamond jewellery pieces increases among the growing middle class there.
Is De Beers planning to buy more mines or bolster production from existing ones?
We continue to invest billions of dollars for production growth with projects in South Africa, Botswana and Canada. In South Africa, we have begun a project to take Venetia mine (South Africa’s largest diamond mine) underground; this will extend the mine life beyond 2040. In Botswana, we are investing in the Cut-8 extension at Debswana’s Jwaneng Mine that will extend the life of one of the world’s richest diamond mines to at least 2028. In Canada, we have a joint venture with Mountain Province Diamonds to build a new mine — Gahcho Kue in the Northwest Territories — that will commence production in late 2016 with a life of mine of some 11 years.
Man-made diamonds are not, in themselves, a threat to the diamond industry as they are completely different propositions.
Extensive research we’ve carried out over the years has told us that consumers see natural diamonds as emotionally significant in a way that synthetics are not and they want the real thing to mark important occasions in their lives. The view from consumers is that you cannot create forever in a lab.
Are there going to be major changes in the Sightholder policy or have these already been instituted?
Earlier this year, we communicated an updated approach for the new three-year supply contract with Global Sightholder Sales. The new contractual period involves more flexibility in purchasing opportunities and requires customers to meet new, more rigorous financial compliance requirements. We believe the new contractual period will strengthen the confidence of all stakeholders in the diamond industry.
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