De Beers cuts back diamond production
De Beers, the wold’s largest miner of diamonds, claims the world’s supply of diamonds is ‘running out’ and intends to slow diamond production in hopes of extending the life of its mines. Des Kilalea, analyst at RBC Capital Markets believes this could result in a 5% increase of prices for the next five years. Gareth Penny, managing director of De Beers says this move is incited by the accelerating demand for diamonds from Asia. De Beers currently accounts for 40% of global rough diamond sales.- Financial Times 26 April 2010.
Belgium pushes for more trade with China
Freddy Hanard, CEO of the Antwerp World Diamond Centre (AWDC), is encouraging trade between Belgium and China. In following this advise twelve Belgium firms representing Belgium’s diamond industry will show at the upcoming Shanghai New International Expo Center this April. According to AWDC mainland China and Hong Kong currently consumes 25% of Belgium’s exported polished gemstones. Deena Taylor of Diamonds.net says research reveals that China’s jewellery market is the world’s third largest.
The world's most expensive rough diamond (507 carats) sold for $35.8 million Friday, February 26th to Chow Tai Fook Jewellery of Hong Kong a division of billionaire Cheng Yu-Tung's business empire. The record-breaking price tag was $10 million over the estimate.
Could we soon see diamond Exchange Traded Funds (ETFs)?
There have been three diamond funds announced in recent years and now plans are in the works to potentially launch a diamond ETF. ETFs exist for gold, silver and platinum and some feel that they could work well for diamonds, particularly since diamond production and the demand for diamonds has decreased since September 2008. The industry is looking for new ways to stimulate demand and some feel that a diamond ETF could do just that.
The diamond industry has certainly not been immune from the credit crunch. On the wholesale side of the industry, diamantaires, who buy rough diamonds from miners, are finding it increasingly difficult to borrow funds in order to purchase gems. The ABN AMRO Diamond Bank is the industry’s biggest creditor, lending $3 billion to the industry. Recently ABN AMRO Diamond Bank has fallen into the hands of the Belgian government after its parent company, Fortis, required financial assistance. Since then, credit in the industry has dried up considerably.
Diamond prices, for the consumer end of the market, could fall another 30% to 40% due to the credit crunch and the economic crisis. Top-end jewels will fall the most and some will be held back from sales altogether. During similar situations in the past, the large players in the industry could control prices by reducing the amount of diamonds they mine. This is more difficult today, however, due to stricter regulations. Trading levels of diamonds are also very low and industry experts predict they will remain so throughout the recession. Things aren’t due to pick up until demand bottoms out and liquidity improves.
