South Africa-based De Beers is planning to increase its diamond output by 15 per cent this year to 38 million carats from 33 million in 2010, to meet rising global demand, especially from emerging markets like India.
The world’s leading rough diamond company, accounting for nearly 40 per cent of the global market share, produced 24.6 million carats in 2009.
“Higher output is good news for the Indian market as it will keep prices under check. In fact, rough diamond prices have been rising continuously for quite some time to hit the pre-crisis level. But, higher output this year may bring some time-bound relief for consumers,” said Rajiv Jain, chairman of the apex trade body, the Gems & Jewellery Export Promotion Council (GJEPC).
Rough diamond prices recovered strongly following a rise in confidence of the industry. However, they are still not back to the pre-recessionary levels in terms of production or sales and a high degree of global uncertainty remains.
While restocking picked up throughout the year, consumer demand rebounded with an extraordinary growth in China and India and the better than expected retail performance in the US during Christmas, said a senior De Beers official.
Strong demand drove a rebound in the prices of DTC rough diamonds by an average of 27 per cent in the year to the pre- economic crisis levels.
While De Beers remains cautious about the diamond market in 2011, continued positive growth is expected albeit at a lower rate, the official added. For the near future, however, continued recovery in the global economic outlook and strong retail confidence are expected to witness positive growth in consumer demand for diamond jewellery in 2011.
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The US market is expected to continue its recovery and the exceptional growth seen in China and India is expected to be sustained. Global economic expansion and retailer sentiment are supportive of further DTC sales growth in 2011, during which total production for the De Beers Family of Companies is expected to reach 38 million carats, approaching full production which will, as planned, be achieved in 2012.
In the long-run, the supply and demand dynamics of diamonds remain attractive.
“Huge pipeline inventory built-up during the economic slowdown had cramped global markets in September 2008. Today, demand has grown leaps and bounds, thereby, leaving no inventory in the pipeline,” said Jain.
Jain said strong consumers’ fondeness for diamond jewellery will not result in a dip in prices, but prices may remain rangebound with upward bias.
De Beers Group’s total sales stood at $5.88 billion for the full year, a 53 per cent increase compared with 2009. Sales of rough diamonds by the DTC were $5.08 billion ($3.23 billion in 2009).
Forevermark, which will launch operations in India in the first quarter of 2011, has started an exploratory phase in the US, yielding positive early consumer research and will continue to assess the market opportunities during the year.