Miners Add Voices to Concerns About Exuberant Early Diamond Sales

11/02/2016 13:24

"The world’s two biggest diamond miners just sold $1 billion worth of gems and it’s making smaller rivals nervous," write Kevin Crowley and Thomas Biesheuvel for Bloomberg Business, and the size of De Beers' ($540m) and Alrosa's ($450m) January sales "far exceeded everyone’s expectations." One concern is that the sales were driven not by consumer demand, but rather by supply cuts last year that led to shortages and lower prices. Analysts have expressed their concerns it’s too much too soon for an industry still reeling from the biggest rout in seven years, and now it appears that smaller miners are worried as well. “It’s going to be very difficult to sustain the current exuberance of the market,” said William Lamb, chief executive officer of Lucara Diamond Corp. “We’ll most probably see diamond prices softening in the back end of this year.” This same sentiment was earlier iterated by rough diamond analyst Paul Zimnisky.

The smaller producers are at the mercy of the two biggest, whose market dominance helps them control prices by reducing output or withholding sales, the authors write. “January was a good start on that road to recovery, but whether we’re firmly on that road, it’s too early for me to call that,” said Stuart Brown, CEO of Firestone Diamonds Ltd. and a former chief financial officer of De Beers. “Time will tell. You don’t get any prizes for being bullish in this industry.” While prices for Gem Diamonds Ltd.’s smaller stones dropped 30 percent to about $150 a carat last year, they’ve since risen about 5 percent, according to Chief Executive Officer Clifford Elphick. “It could be an indicator that there is starting to be a little bit of appetite and that the decline has stopped,” he said in an interview in Cape Town. “But you need three or four months in a row to be able to say there’s a trend.” Paul Loudon, CEO of DiamondCorp Plc. told Bloomberg that, “Early this year, there’s real demand from the factories for rough” diamonds. “It’s not sustainable. It’s not going to last for the whole year.”