De Beers, which controls about 40 percent of the global rough diamond market thought last April that this year’s prices will not surpass the 27 percent increase registered in 2010.
"We believe the price (for rough diamonds) will grow this year ... but not by the same level as we saw last year," Varda Shine, chief executive of De Beers sales and marketing arm, the Diamond Trading Company, told Reuters in an interview.
"The prices went up by 27 percent during 2010, it actually went down quite a lot in 2009."
Fast-forward the year to July and De Beers had begun singing a different tune, as it obviously witnessed rough diamond prices surpassing the growth recorded in 2010.
The miner said then that rough diamond prices had even gone above pre-crisis levels following a 35 to 40 percent rise since January this year.
It attributed the growth to increased scarcity and an emerging role of gems as an investment.
“Diamonds are [scarcer] than before the crisis and there are three markets where demand is very strong: China, India and the United States,” Reuters quoted De Beers executive director Stephen Lussier as saying in an interview.
“The U.S. still represents 40 percent of global demand,” he said, adding that Americans had rediscovered diamonds as a form of diversification investment.
Companies such as TSX-listed Harry Winston Diamond even suggested that rough diamond prices had registered a 62 percent growth.
Although, De Beers see global demand growth for rough diamonds setting a new record this year, it was careful not to be flattery with its rough diamond price guidelines, perhaps after learning from events that took place between April and July.
The diamond giant told Rough & Polished last month that while strong demand would sustain prices for the remainder of the year; it does not anticipate prices increasing as rapidly as they did in the first half.
However, Firestone Diamonds hit the bull’s eye when it reported recently that results of a tender it conducted, in Botswana had reflected a drop in overall rough diamond prices of between 15 to 20 percent since the beginning of August due to recent uncertainty in international financial markets.
This position was also shared by Petra Diamonds, when it announced its preliminary results for the year ended June 2011.
From a total of 24,109 carats that were available for sale during the Botswana tender, Firestone said only 3,395 carats were sold for a value of $863 037.
Diamonds sold included 1,846 carats from Liqhobong, in Lesotho, which were sold for an average of $231 per carat, and 1,549 carats from BK11, which were sold for an average of $282 per carat.
Firestone, however, said 20 714 carats, principally comprising smaller diamonds, were withdrawn as they failed to achieve reserve prices.
"Although demand for smaller diamonds has decreased, it has remained firm for larger, better quality diamonds, and we are confident that we will see increased demand for our full range of production later in 2011," said Firestone chief executive Tim Wilkes.
The company also said that with continued growth expected in demand from China and India as well as insufficient new production to address the current shortfall in supply, the prospects for rough diamond prices remained positive.
“The company expects that stability will return to the rough diamond market later in 2011 and that the shortfall in rough diamond supply will limit any further significant decreases in rough diamond prices,” it said.
The Hong Kong Jewellery and Gem Fair held this September would also show the direction in which diamond prices would take.
However, with the uncertainty in international financial markets still with us amid growing fears of another global economic recession, chances of rough diamond prices recovering (at a supersonic speed) remained a sheer pipe dream.
Mathew Nyaungwa, Rough&Polished
