Diamond prices to recover: De Beers

JOHANNESBURG – De Beers, one of the world’s largest rough-diamond producers, sees the sogginess of diamond prices in the final quarter of last year continuing into this year, but the weakness was unrelated to the downturn in global commodity markets, chief executive officer Philippe Mellier said on Friday.

Prices should recover in the second, third and fourth quarters of this year and this was almost a reverse of the trend last year when the first three quarters of the year delivered rising prices, he said.

Rough diamond prices rose 7% last year, Mellier said, declining to give a forecast for this year of what prices might do.

“I definitely see some potential for a price increase this year, but it’s too early to tell,” he said.

The two factors to determine prices would be year-end selling season in the US market, which consumes about 40% of global diamond production, and the Chinese New Year, starting on Thursday.

Demand had been good in the US over the past year end, Mellier said. “We are quite hopeful for the Chinese New Year and if it is pretty good we will have demand and if there is a price increase it will be higher.”

“There is demand. In 2014, while we don’t have the final number, it will be close to 4% which is a bigger increase than the year before,” he said.

“We are not talking to a declining market and our final market is still increasing demand by 3% or 4% and that’s what we’re planning for 2015.”

De Beers increased production last year by 5%, with output of 32,6 million carats by the end of December. Its mines in Botswana, shared with that country’s government, reported a stronger performance. Output this year is forecast at between 32 million and 36 million carats, depending on the market.

Mellier said that in the sight or purchase of diamonds this year, De Beers, realising conditions were difficult, offered to let its sightholders’ roll 25% of their purchases over to the second and third sights.

A number of buyers of diamonds have been complaining that their margins are coming under pressure as big miners such as De Beers and Alrosa appear to be driving their own sales hard for profit, ignoring the financial difficulties the buyers are coming under because of a surplus of polished diamonds and difficulties in securing finance.

“I cannot be responsible because they are separate businesses and I don’t own or control them . . .

When we see the price of polished diamonds softening we will react. We can react with volume or price,” Mellier said.

Next month De Beers will publish its list of sightholders with which it has agreed new supply contracts starting on April 1.

The contracts have strict financial criteria and transparency.

– DB Live

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