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Global diamond production to fall 33% as mining reserves dry up

Rajesh Bhayani/Mumbai 14 Mar 19 | 11:27 AM

Craftsman work at a diamond processing unit

A body representing eight leading global diamond mining companies sees diamond production coming down by 33 per cent going ahead with 10 per cent of the production expected to come down next year. A gradual fall in production will also result in better prices for the precious stone.  

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Australian mine Argyle has decided to close a mine, in which diamond reserves are depleting, which will knock off 10 per cent of annual world production by 2020.

Last year mines produced 150 million carat rough diamonds globally, which was the highest since 2008, when the output was 163 million carat. The all-time high is 177 million carat, reported in 2005.

The drastic fall, which began after the global financial crisis in 2008, is now behind, but with no new mines on cards and reserves in old mines getting exhausted by 2030, production will come down to 100 million carat.

The reduction in production to a third from current levels over a decade means that a diamond would get its “true value", says Diamond Producers Association (DPA). It takes almost a decade to identify a diamond mine as much time to develop it. Even if a mine is going through in this process, no new production is expected in the next decade.

At present, unpolished or rough diamonds prices are softening and the macro-scene is "not that promising, though it is not bad either," said Jean-Marc Lieberherr, chief executive officer, Diamond Producers Association (DPA), which represents the companies — such as Alrosa and De Beers — that mine 75 per cent of the diamonds produced globally. Strong dollar and equities, too, are taking the shine away from luxurious assets like diamonds. 

ALSO READ: Industry body steps in to ensure rough diamond supply to polishing units

It is planning to bring down the production to a third of the current levels in a decade to ensure that a diamond gets its “true value".

The impact of excessive diamond mining could also be felt in India, where 85 per cent of the world’s rough diamonds are polished. Speaking with Business Standard, Jean-Marc said: “Polis­hed diamonds prices in India has also remained soft, and polishing units and companies are keeping inventories based on their needs and to only meet immediate dem­and." The companies are “very cautious" in replacing inventories, he said. 

“Confidence is down ahead of the (general) election. Consumer demand for luxurious assets like diamond-studded jewellery usually remains low during elections. However, it is not disastrous as India has huge potential for expanding local sales... its local sale as a share of the global market will significantly go up from 6-7 per cent, now," he said, but maintained that prices of rough diamonds will remain soft in this year.

ALSO READ: Nirav Modi declared absconder for evading duty on imports of diamonds

The DPA has also commissioned a study to S&P Global, which is coming out with research to quantify benefits of diamond mining on ecology, economic and social lives, and to the government in form of taxes, etc, and impact of employees of the mining companies. It is also going to launch a campaign with an aim to help Indian units identify synthetic diamonds. For this, it is working with Indian stakeholders, including the Gem and Jewellery Export Promotion Council.

The Indian gems and jewellery sector is currently facing poor sales, working capital crunch and the impact of the overall global slowdown in the demand of luxurious assets.

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