De Beers to raise rough diamond output by 26%

But prices in India to remain high due to resurgent demand.

De Beers, the world’s largest rough diamond miner, plans to raise the output of precious stones by 26 per cent this year to meet the rise in global demand triggered by a revival in American and Asian economies.

In an e-mail, the company’s spokesperson said the company’s rough diamond output was estimated at 31 million carats in 2010 as against 24.6 million carats last year. In 2011, the company plans to raise this to 40 million carats.

At the beginning of 2009, De Beers dramatically reduced production at its mines in line with the reduced demand from DTC Sightholders, which caused a significant reduction in output. But demand gradually recovered in the second half of 2009, resulting in an output of 18 million carats during the period — an increase of 173 per cent over the first half of the year.

Still, this was lower than in 2008. In fact, De Beers had reported the 2008 diamond output at 24 million carats. As a result, in 2009, total rough diamond output declined 49 per cent to 24.6 million carats.

De Beers accounts for about 45 per cent of the world’s rough diamond output and supplies a majority of them to about 40 Indian sightholders. Importers in India, in turn, cut and polish these. According to estimates, India processes 92 per cent of all global rough diamond pieces (60 per cent by value).

Prices will continue to shine
However, the additional production may not provide Indian consumers a reprieve from rising prices due to resurgence in demand in the domestic market. Industry players say the shift in consumers’ preference to low-priced diamond jewellery from pure gold jewellery and good economic numbers in the US have revived the demand for rough diamonds. What also helps is the choice of low-priced diamonds, which are about 50 per cent cheaper than normal diamonds. Additionally, consumers have gradually shifted towards diamonds due to guaranteed buy-back, transparent written pricing and, most importantly, third-party certification.

“Miners restructure production plans depending on market sentiments, as witnessed in 2008 and 2009. Since demand has recovered, prices and production targets are being re-adjusted accordingly,” said a company spokesperson.

Prices will continue to rise in the rest of the year and may go up by as much as 70 per cent from current level, says Mehul Choksi, chairman of Gitanjali Gems.

In the last one year, however, diamond prices have risen exorbitantly. For instance, according to market sources, the price of rough diamonds of one particular category is currently ruling at $50 a carat as against $28 a year ago. Polished diamonds has followed suit — having reached $90 a carat as against $60 a carat a year ago.

Praveen Shankar Pandya, chairman, Diamond India Ltd, a diamond trading company formed by a group of corporates, however, feels diamond prices may rise 20-25 per cent despite higher production by miners.