Thursday, April 18, 2024

Robust demand for rough diamonds

De Beers’ rough diamond sales have peaked from the previous sale to $550 million in the fourth sales circle of 2018, the company said on Tuesday. However, the mining giant’s aggregated sales value for the first four cycles of the year is lower than the comparable period in 2017.

The provisional figure sale of $550 million in the fourth sight is 5 percent higher than the May 2017 sight as well this year’s third sight sales. De Beers, the world’s biggest diamond producer by value, opened the year strongly with $672 million worth of diamonds in its first sale of the year before declining by 16 percent in the second sales cycle after selling $563 million worth of rough diamonds. The third sales cycle of 2018 amounted to $520 million, down by 8 percent.

Bruce Cleaver, De Beers Group chief, said: “In the fourth sales cycle of the year we saw robust demand for De Beers’ rough diamonds, reflecting continued strong demand for diamond jewellery, especially from American consumers as we head towards the important JCK Las Vegas trade show at the start of June.”

The mining giant holds ten Global Sightholder Sales and Auction Sales every year in Gaborone and the sights or auction sales are restricted to the top 85 customers who buy the diamond packages at a price determined by De Beers.

The latest figures from Anglo American Plc, De Beers’ parent company, comes amid global consumer demand for diamond jewellery which hit a new all-time high in 2017, with the US continuing to be a reliable market for luxury goods. Global consumer demand for diamond jewellery climbed to $82 billion, a two percent increase on the previous year, according to industry insight data published by De Beers Group.

Last month Anglo American reported rough diamond production jumped 15 percent to 8.5million carats in the first quarter, up from 7.4 million carats in the same period last, a performance that highlights the firm’s lead in the global market for rough diamonds. The London headquartered mining giant said it benefited from ramped up production in several of its De Beers diamond mines.

De Beers, which is the other half of Debswana, has now sold $2.3 billion worth of rough diamonds in 2018, down by 4 percent from the $2.4 billion it sold during the first four cycles of 2017. The slight drop in value is despite the alleged price increases by the secretive De Beers. According to Thomas Biesheuvel of Bloomberg, De Beers increased prices for the third straight time at sight number four, according to people familiar with the matter. This time, prices were said to have increased by nearly 1 percent and while the gains are modest, he writes, they come on top of increases at the two previous sights, which saw gains of 1 to 2 percent.

Paul Zimnisky, an independent diamond industry analyst, who also runs the Zimnisky Global Rough Diamond Price Index, this week published a report titled “Why Rough Diamond Prices are at a 52 week high”, in which he said diamond demand is correlated with global GDP growth and a current coordinated environment of global economic growth recently seen in Q4 2017 and Q1 2018 has translated to strong consumer sentiment and retail sales, especially in the industry’s most important markets.

“Pending no major global economic disturbances disrupting consumer diamond demand, incremental year-over-year diamond production declines are forecast to drive real diamond prices up approximately 10 percent cumulatively from 2018 through 2021 (17 percent in nominal terms),” he noted. “Further supporting supply dynamics favorable to prices, producer excess inventories have been reduced to multi-year lows and excess production capacity of the major producers is expected to be insufficient to significantly offset the pending supply gap.”

According to the Zimnisky Global Rough Diamond Price Index, rough prices are up 3.9 percent year-to-date through mid-May, marking a 52-week high.The Zimnisky Global Rough Diamond Price Index was created to consolidate reliable rough diamond price information and publish current respective price changes of rough diamonds on a weekly basis in the form of an index.

Given the highly concentrated state of the diamond mining industry and the relatively opaque nature of rough diamond trading, reliable, easily-assessable indicative rough diamond price information has historically been difficult to source. The intent of the Index is to track, analyze, and disseminate current aggregate rough diamond price fluctuations for use by a range of diamond industry participants.


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