The State of the Global Diamond Industry Going Into Summer 2016

(paulzimnisky.com) - As April 2016 concludes, the diamond industry has without question improved relative to a year ago, however, current industry data and commentary paints a mixed picture as to whether market fundamentals have in fact stabilized enough to support a new wave of sustainable growth continuing into the near-to-medium-term. 2016 rough sales through April have surprised to the upside, with De Beers and Russia's Alrosa (RTS: ALRS) selling a combined $3.1B, which is an 18% improvement over a year ago, but still 13% below comparable 2014 figures. The demand so far this year is indicative how under-stocked the mid-stream sector was following very cautious inventory management going into holiday-season 2015. In addition to inventory shortages, rough buyers benefited from a ~7% De Beers price cut in January which allowed for diamond manufacturer margin improvement, further supporting demand. Demand followed through in February which allowed De Beers to raise prices ~2% at its third sight of the year in April, the company’s first price raise since Q4 2014. It appears that the midstream segment of the industry is adjusting to the new environment of reduced credit availability and is now more cognizant of the greater sensitivity the industry faces to macro market shocks. Diamond manufactures are seen buying rough stock only 3-months in advance, where as in the recent past they would buy 6-months out or more.