World’s leading diamond producer by value, De Beers said it is anticipating a reasonable growth in diamond jewellery demand this year.
Group media relations manager Lynette Gould told Rough & Polished’s African Bureau Editor In Chief Mathew Nyaungwa that China would likely drive the growth.
She, however, could not be drawn into providing the company’s projections for rough diamond prices, stating that these were reviewed on a sight to sigh basis.
De Beers’ April sight ended with an estimated value of $650 million after the group raised prices by an average of 3 percent.
Although some sightholders had expressed concern that De Beers may opt to make consecutive increases by small increments rather than one larger change at once, the group said that it takes a long term view of pricing in light of its assessment of prevailing and forecast market dynamics. It said it was not basing its price adjustments on short-term speculative premiums.
Below are the excerpts.
What has been the state of rough diamond market during the first quarter of the year?
The rough diamond manufacturing sector closed 2012 with high levels of inventory, particularly in the higher-end categories of diamonds, and faces continued pressure in terms of midstream liquidity. We are expecting moderate growth in diamond jewellery demand in 2013, supported by a more positive picture emerging from China. Some upside is possible in the US, while trading conditions in other markets are likely to be challenging.
Rough diamond prices fell 12 percent in 2012. What is your group’s projection for 2013?
We continue to review our rough diamond prices on a Sight by Sight basis to ensure they remain competitive and attuned to the changing market. We expect moderately positive price growth during the year.
Anglo American reported last month that De Beers’ first quarter diamond production leaped 3 percent year on year to 6.4 million carats. What necessitated this increase?
Diamond production increased by 3 percent to 6.4 million carats due to favourable processed ore grade, offset by a reduction in tonnage processed due to maintenance at Debswana’s Orapa Mine in this period.
De Beers said it is optimistic about its last remaining concession in Angola’s Lunda Norte province, where it is evaluating three kimberlites, which can contain diamonds - at Mulepe. When do you expect this project to come upstream?
The conceptual study for the Mulepe-1 kimberlite was completed in November 2012 but indications suggest a stand-alone deposit is uneconomic under current assumptions.
The group’s April sight ended with an estimated value of $650 million after the company raised prices by an average of 3 percent. What necessitated the price adjustments?
De Beers adjusted its prices in Sight 3 by an overall low to mid - single digit level. The adjustment varied from category to category and box to box taking into account our assessment of prevailing and forecast market dynamics. Through the latter part of 2012 and into Q1 2013, the industry has demonstrated positive signs of recovery through increasingly positive demand for diamond jewellery in US, China and India; de-stocking in the cutting centres; positive movements in polished prices; increased demand for rough.
Some sightholders have expressed concern that De Beers may opt to make consecutive increases by small increments rather than one larger change at once. What is your comment on this fear?
De Beers takes a long term view of pricing in light of its assessment of prevailing and forecast market dynamics (i.e. we are not basing our price adjustments on short-term speculative premiums). The way we price is reflective of our overall product offering, which provides scale, consistency and continuity.
Your group recorded shortfalls in the first two Sights of the year. Has supply normalised?
It is true that we experienced shortfalls in the last ITO period from March 2012 to March 2013 and these shortfalls were the differences between the aggregate ITO level that we announced at the start of the 2012-2013 ITO in March 2012 in comparison to the total amount of rough diamonds we were actually able to supply during the full ITO period. De Beers has now communicated supply levels to its Sightholders for the 2013-2014 ITO period. These ITO supply levels are based on 2013 forecast mine plans and we do not anticipate the shortfall issue to continue in the future as, absent any other unforeseen mine issues, the new ITO’s will reflect forecast production levels.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough & Polished
