A new world order in terms of domination of the global diamond market is developing, with the position of De Beers as a major player threatened by the entrance of new players. This paradigm shift has also been fuelled by the moving of demand from the West to the emerging economies of Asia.
This narrative was elucidated by Botswana Diamonds Chairman John Teeling, who said the order has shifted with the growth of middle class in the East. When announcing the company’s preliminary results for the year ended 30 June 2015, Teeling explained that there is a rapid shift in diamond demand from the Western world to the East.
“Notwithstanding recent volatility in China, emerging markets throughout Asia are experiencing rapid economic growth,” the charismatic Teeling said to shareholders.
“There is an emerging middle class with disposable income and diamonds are high on the list of desirable purchases for Chinese and Indian consumers.”
The United States remains the global biggest jewellery market, but Asian giants of China and India have been en-route with the growth of capitalism, hence the strong middle class. Other Asian countries are also becoming important markets for diamonds.
De Beers said in the past that China is the world’s fastest growing market for diamond jewellery sales, with the number of diamond jewellery retail doors in the country increasing by almost 30 percent between 2010 and 2013.
“But there are other very big markets which are rapidly expanding such as Thailand, the Philippines, and Vietnam to name three,” said Teeling.
De Beers and Alrosa play a dominant position in the global diamond trade although other players are coming into play. Teeling noted that as the percentage of the world diamonds supplied by De Beers falls, price volatility increases.
“A dominant market player can control supply and therefore price by having the financial strength to hold inventories of diamonds. This facility is now largely gone. The old order has changed with new entrants at all levels of the supply chain,” he said.
However, Teeling said new buyers of rough stones, mainly Asian, lack the financial strength of De Beers. In times of liberal credit these buyers stock up.
“When credit gets tight some find themselves exposed and forced to sell thereby increasing volatility.”
The Botswana Diamonds results showed its losses narrowed during the period from ┬ú948,610 in 2014 to ┬ú339,529 as the company continues to scour for diamonds in the Orapa area. Botswana Diamonds is exploring in Botswana, the biggest diamond producing country in the world by value.
It has interests in 27 licences. 14 licences located in the Orapa and Gope areas are in a 50 percent joint venture with Alrosa, the world’s largest diamond producer by volume. Three licenses are wholly owned by BOD while the company owns a 15 percent interest in 10 licenses in the Kalahari.
This week, Lucara Diamond, which bought Teelings’ African Diamonds, was the talk of the mining industry after it recovered a 1,111 carat gem quality, Type IIa at Karowe mine in the Orapa area. The stone, which measures 65mm x 56mm x 40mm, was recovered by the newly installed Large Diamond Recovery (“LDR”) XRT machines.