Outstripping rise in rough prices may be triggered by upsurge in polished prices

According to VTB Capital, an investment bank headquartered in Moscow, the increase in prices for rough diamonds by their largest suppliers, De Beers and ALROSA at the end of last year and the start of this year was triggered by an upsurge in polished prices over the past 6 months (by an average of 20% according to Rapaport), including January, Finmarket said in an article published on Tuesday. In their review, the bank's analysts noted that polished prices “remain at the high levels of December,” that is, at the levels of the past holiday season.
VTB Capital predicted that demand for rough diamonds will continue during the first quarter of 2021, despite rising rough prices and falling global production. The bank said that the increase in rough prices announced by ALROSA and De Beers during their first trading sessions in 2021 was the culmination of an upturn in the diamond market over the past few months.
“However, as diamond production fell to a 30-year low in 2020 and shows no signs of growth in 2021, while successful holiday jewelry sales have boosted restocking in diamond manufacturing and retail, we believe the positive momentum will continue at least during the next few months,” the bank’s review said.
According to Finmarket, VTB Capital expects that the total diamond output in 2021 will change insignificantly, since the complete depletion of the Argyle Mine will fully offset the growth in production reached by De Beers and ALROSA. In addition, the recent lower production guidance announced by De Beers and ALROSA for 2021 is primarily due to their inability to rapidly ramp up diamond output exacerbated by operational problems at existing diamond fields, which limits the potential of production growth in the short term.