Diamond prices expected to fall, production expected to rise

Global rough diamond production is expected to hit over 135 million carats in 2015, up three percent from 131 million carats last year, according to a study by Paul Zimnisky.

The expected global price in 2015 will be $103 per carat, which would be a ~2% decrease from 2014.

“Last year prices were down an estimated 3-to-5% as the closure of Antwerp Diamond Bank in October led to industry-wide liquidity concerns for rough diamond buyers,” writes Zimnisky.

“In addition, a slower-growing Chinese economy, deflationary pressures in Japan and the EU, and multiple geopolitical tensions, led to downward pressure on rough prices which is expected to carryover into H1 2015.”

The rising American currency has pluses and minuses for diamond miners.

“A strong U.S. dollar also played a role in recent diamond price weakness, given that diamonds are typically denominated in dollars.  However, this foreign exchange effect can also have a positive impact on miners that account for operating expenses in dollars; for instance, wages paid in local currency are relatively “less expensive” when converted to dollars.

“A lower oil price should also have a favorable impact on miners as haul trucks, generators, and some grids are powered by diesel.”

Zimnisky also notes that ALROSA has been selling additional diamond inventory, probably due to the Russian Federations wobbly economy.

Synthetic diamonds are not a threat yet. They are too expensive to make and the quality is still not there. But Zimnisky says less-expensive, larger, higher-quality synthetics are inevitable.

Udachnaya diamond mine, Russia Source ALROSA

Image: Udachnaya mine, Russia. Source: ALROSA