Diamond supply crunch on its way — analysts

Global production of diamonds reached 124 million carats last year and, according Bain & Company consultants, 13 new mines should be adding 23 million carats by the end of 2012. But Money Week’s analyst Tom Bulford is warning those and other figures are not sufficient to avoid a looming supply crunch.

The growth of Chinese and Indian middle classes would have the largest impact on the equation, says Bulford:

In these two countries the number of households with a disposable income of $15,000 is expected to rise to about 469 million in 2020 from about 220 million today.

That seems certain to boost demand for diamonds, and since consumers have a tendency to equate price with worth, rising prices could lead them to value diamonds even more highly than they do today.

Another factor affecting diamond supply, writes the expert, is the ongoing implementation of the Kimberley Process, which prevents the sale of “conflict diamonds” or illegally traded rocks used mainly to fund conflict in war-torn areas.

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