Rough Supply Up, Polished Sales Down, and Stockpiles Created

(ehudlaniado.com) - It was only a week ago when we discussed the disconnect between rough and polished diamonds, and it seems that the divide is only growing. Last week, I noted that De Beers’ rough diamond sales increased during the first half of 2017. My point was that rough diamond supply increased, while polished prices and demand declined.
De Beers reported that their diamond production in the second quarter of the year totaled 8.7 million carats, a 36% year-over-year increase. My research firm Mercury Diamond reported two weeks prior that the Mercury Diamond Global Tracker™ (MDGT™), an index of polished diamond prices, declined 0.6% year-over-year in June 2017. It was the 31st consecutive month of decline, a period of more than two and a half years of continuous eroding value. The disconnect, however, is less related to changing prices, and more to demand: if there is demand, the supply makes sense.
Last Tuesday, De Beers announced the results of its sixth cycle rough diamond sales. According to the press release, it sold $572 million worth of rough diamonds during the cycle though all of its different channels. This is $31 million more than the $541 million worth of rough diamonds it sold during the previous cycle, and $44 million more than the $528 million worth of rough diamonds it sold during the sixth cycle of last year. So, not only did rough diamond sales increase during the first half of 2017, but the trend of increased sales is continuing into the third quarter as well.