Recent reports that diamond mining giants such as De Beers, ALROSA and Rio Tinto were losing out in India to stones from Zimbabwe’s Marange made an interesting reading.
Prices of rough diamonds from De Beers and ALROSA were said to have slipped by about 10 percent per month in Surat as a result of diamonds from Marange entering the market.
De Beers, ALROSA, Rio Tinto and BHP Billiton accounted for up to 70 percent of rough diamond global production.
The international diamond regulatory body, The Kimberly Process (KP) last November authorised the resumption of diamond sales from Marange, which had been suspended on allegations of leakages and abuse of human rights by state security guarding the diamond fields.
Mbada Diamonds, Anjin Investments, Marange Resources (formerly Canadile Miners) and Diamond Mining Corporation (DMC) were currently mining in Marange.
These miners had a stockpile of 4.5 million carats with a value of up to $5 billion and were also targeting an output of 20 million carats this year, up from 9 million carats in 2011.
Cheap diamonds
Indian traders said Zimbabwe diamonds were available at $40 per carat, which was considered cheap compared to other sources where they were sold for $100 per carat.
"Diamonds from Zimbabwe have brought stiff competition to the international market, causing prices to fall sharply," a diamond trader at Mumbai's Zaveri Bazaar, Santosh Desai was quoted as saying by local media.
"An immediate consequence of their arrival was that diamond prices … crashed by 25 percent in the markets of Mumbai and Surat since November 2011."
About 11 million carats of Marange diamonds were expected to flood the Indian market this year while 30 percent of the diamond pieces currently manufactured in Surat were Zimbabwean stones.
No rocket scientist
The Indian Times quoted a local diamond trader Uday Mahandale as saying that the Asian country consumed about 80 percent of rough diamonds produced by ALROSA in 2011.
ALROSA targeted an output of 34.5-million carats in 2011.
He also noted that out of the $5077 million worth of rough goods sold annually by ALROSA in 2010 around $3859 million worth of goods came to India through direct and indirect channels.
One does not need to be a rocket scientist to conclude that Zimbabwe would take away a large chunk of this consignment this year given the fact that its gems were 50 percent cheaper compared to other sources.
The second online auction of the Surat Rough Diamond Sourcing India held earlier this month for small and medium diamantaires also received an unenthusiastic response.
Industry sources said the flow of low-range Zimbabwe diamonds in Mumbai and Surat was one of the reasons behind the tepid interest shown by small and medium diamantaires.
Although the Indian firm presented about 300,000 carats of low range goods valued at more than $6 million during the auction, it managed to sell only 21 of the 31 lots for $3 million.
The first online rough auction held in January accrued $17.2 million.
Influencing
Desai said that diamonds from Zimbabwe would influence prices and demand for rough diamonds in 2012, largely as a result of increasing demand from India.
India imported rough diamonds worth $11 billion in 2010-11, out of which more than 50 percent were of low-range quality.
However, De Beers’ chief executive Philippe Mellier was quoted by Rapaport as saying that the large quantities of rough diamonds from Marange had little impact on demand for the group’s goods or its prices.
“There will be competition from Zimbabwe but I don’t think these diamonds will have a material impact on the market,” he said.
“We know the Zimbabwe stones are of a lower quality and certainly compared to the quality of diamonds that De Beers is offering, I think we can compete quite nicely.”
Although De Beers might be confident of producing top quality diamonds compared to those coming from Marange, what should not be ignored is that the low range Zimbabwe goods were in high demand in India, as well as the Middle East, China, Iran and Armenia.
It would certainly be foolhardy to ignore the impact this has had on low range diamond prices in the Far East.
Dismissing the competition posed by Marange diamonds can only be done at one’s peril. Who does not produce low range goods anyway?
Zimbabwe’s goods - low range as they were - would certainly rule the roost as long as diamantaires in India continue to have an unbridled hunger for cheap stones.
If the figures coming from Surat are correct then ALROSA should have every reason to get worried.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
