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Asian Demand, Tighter Supplies are Main Drivers in 2012

Feb 20, 2012 4:11 AM   By Dilipp S Nag
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RAPAPORT... Global diamond demand is likely to grow at a ''fairly nice'' pace, driven by consumers across Asia coupled with tighter supplies in the absence of any new big diamond mines, said Varda Shine, the chief executive of the Diamond Trading Company (DTC).

There haven't been  any new big mines discovered during the past 20 years and the current mines are all ageing, Shine said at a press meet in Mumbai. ''So when we look at the next 10 years, there’s no doubt demand is going to outweigh supply.''

However, needed rough supplies are likely to be in balance this year due to the availability of goods already in the pipeline, Shine noted. ''At the end of the last year, people realized that there are sufficient goods in the pipeline and so if there isn’t fresh supply coming in this year, there is still some inventory in the pipeline that can be utilized.''

De Beers curbed rough production in the second half of 2011 as demand slowed, utilizing the period to carry out maintenance at its mines and address waste stripping backlogs and the company will continue this through the first half of this year. De Beers expects its group production to remain flat at around 31 million carats in 2012.

Shine stated that 2012 is going to be a “solid year” and ruled out the possibility of it being “as crazy as last year.”

Diamond prices rose significantly in 2011, driven by strong gains in the first half of the year. However, the high levels reached in July proved unsustainable as global factors and liquidity challenges caught up with the industry.

''The demand is forecasted to be growing at a pace that we have never seen before,'' Shine said. China and India are new drivers of growth, while the U.S. market will continue to buy, she explained.

''We have seen consumers continuing to buy diamonds and demand keep growing. We are seeing India has been a big driver over the last decade,'' Shine said.

The U.S. consumer demand growth in 2011 is ''surprising,'' she noted. “We had predicted the U.S. consumer demand growth in mid-single digits. We are still collecting the final data but it looks like that in 2011 the demand has grown by double digit, a number that we haven’t seen in many years.''

Shine said that De Beers is planning to move its London sights and sales operations to Botswana by the end of 2013.

"The work to relocate some of our staff in order to make sure that we have some system in place has already started and from January 2014 the sight is going to take place in Botswana," she noted.

Shine, who joined De Beers in 1984 and initially worked in the Diamdel office in Tel Aviv before transferring to the DTC in London, said that she will be also be moving to Botswana.

Shine stated that DTC’s new dynamic distribution policy may help companies, which are becoming stronger and able to grow, to secure supplies before 2015. DTC's new supply of choice contract will be effective from March 31 through March 31, 2015.

In assessing DTC’s price discovery process, Shine said that Diamdel auctions and market conditions, among others, form an integral part of the process. Diamdel sells about 10 percent of De Beers production through online auctions.

Shine said that the police raid at the bourse in Israel is going to create some bad press  for the diamond industry, but it should also force the industry become much more transparent by operating a clean business.

Israel’s rough and polished diamond trade slumped in January as an ongoing police investigation into fraudulent money lending in the bourse took its toll. The country’s polished exports fell 9 percent year on year to $566.3 million in January, according to data published by the Central Bureau of Statistics (CBS). Rough exports declined by 40 percent to $232.7 million. Total diamond imports, including rough and polished, fell 24 percent to $514.9 million during the month.

Shine also noted that the industry is facing a shortage of skilled labor as younger professionals  in India and China today have many options for a career  and they move on easily.  However, now there is focus on giving training and enhancing the skills of workers, which is good for the industry, she concluded.
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Tags: China, demand, diamond, Diamond Trading Company, Dilipp S Nag, DTC, India, mines, Rapaport, supply, US, Varda Shine
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Comments: (2)  Add comment Add Comment
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Feb 22, 2012 3:33AM    By Dilipp Nag
It means that the last year was crazy in a negative way and this year it won't be. The prices rose significantly in the first half of 2011 but couldn't sustain at higher levels and fell during the second half of the year.
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question
Feb 20, 2012 5:20PM    By jack simon
What does that mean "as crazy as last year" Will it be good but not as good? Or was last year crazy in a negative way and this year will not be?
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