The global diamond market faces a “fragile recovery” in spite of efforts by De Beers to create stability, according to De Beers CEO Philippe Mellier in a report by the Financial Times. “It’s a very fragile recovery. The market is not going to bounce back like it did after the last big problems,” he said, referring to the recovery after 2009, when De Beers cut output by half following the global financial crisis that hit diamond buying. The world’s largest diamond producer by value supplied 28.7 million carats of rough to the sector last year.
Mellier said there were signs of a rebalancing of supply and demand. “My view is we have seen the market bottoming." Inventories of rough and polished were “very close to normal and polished prices stabilized around December”. Rough diamond buyers were, on average, using 65% of their bank credit lines instead of being fully extended like they were last year, giving the industry borrowing headroom and indicating a normal rotation of stocks, he commented. However, he also warned that “there’s still a lot of instability out there in the macroeconomic environment . . . which could trigger different consumer behaviours”. As a result, De Beers plans to keep a tight control on rough diamond production and expects to mine between 26 million and 28 million carats of rough in 2016. Mellier said De Beers fourth cycle of rough diamond sales taking place this week would generate lower revenue than the first three.