De Beers Supports Govt Diamond Sales

DE BEERS says it fully supports the participation in diamond sales by countries which produce rough diamonds.

This was revealed by De Beers group chief executive, Philippe Mellier, when he gave an overview of the inaugural Diamond Insight Report 2014 via Skype at the Namdeb Centre in Windhoek yesterday.

Mellier said De Beers’ support for government participation in diamond sales can be seen by its recent decision to move its diamond sales operations to Gaborone, Botswana.

The move secured a new 10-year contract for the sorting, valuing and sales of diamonds from mines run by Debswana, a 5050 venture between De Beers and Botswana.

In July, Namibia’s mines and energy minister Isak Katali revealed that the government wants to set up a new company to market and sell some of the diamonds mined from the ocean floor by Namdeb Diamond, a 5050 joint venture with De Beers.

Mellier citing ‘confidentiality’, could not give details about the ongoing negotiations on the planned diamond company between De Beers and the Namibian government.

“Because of a confidentiality clause, I cannot disclose any information regarding the negotiations,” said Mellier.

Global diamond jewellery sales have reached a record high of US$79 billion, according to the Diamond Insight Report 2014. This equals a demand growth by over 3% from 2012 to 2013.

The global demand for diamond jewellery is expected to grow over the long-term, driven by the ongoing economic recovery in the US and growth of the middle classes in developing markets such as China and India.

The two biggest markets,US and China, according to the report, both grew by more than the global average, with sales of polished diamonds increased in the countries by 7% and 14% respectively. In contrast, sales fell by 6% in Japan and 10% in India.

India and China have also seen their domestic diamond markets grow by a compound annual growth rate of 12% in the local currency terms between 2008 and 2013.

The report, however, cautions that while diamonds retain their special allure with consumers around the world, future demand levels cannot be overestimated.

This is because the overall category is facing increasingly g and sophisticated competition from other luxury categories, with diamonds’ share of aertising in the US market having reduced somewhat.

The report estimates that diamond production is expected to fall gradually while operation costs will continue to increase, despite a 7% increase in 2013 in carat terms over 2012 levels to a total of around 145 million carats.

However, the diamond production increase achieved in 2013 remains well below the 2005 peak of around 175 million carats, according to the report.

The report further highlights that a forecast reduction in supply from the existing sources will likely not be matched by new production coming on-stream in the years ahead and demand supply is expected to plateau in the second half of the decade before declining from 2020 onwards.

“It’s unlikely that the diamonds production peak by 2020 will go back to that of 2005. It is estimated that 160 million carats will be reached from now until 2017,” said Mellier.

The report reveals that the trend of the three principle input cost – labour, electricity and diesel- which have all seen increases well above the inflation levels in the main diamond production countries over the last decade is set to continue.

Because of this, the report says substantial investment will be required in diamond production, technology and branding, marketing and retail standards if the industry is to sustain its recent levels of success into the future.

“Consumer demand remains one true source of value for the diamond industry. With demand forecast to increase from 2013’s record levels, the opportunity for growth is clear,” Mellier remarked.

However, he was quick to note that this “must not be seen as cause for complacency” as the industry “will continue to lose ground” to other categories if it does not invest significantly in production, marketing and technology.

Source : The Namibian