MARKET INTELLIGENCE BRIEFINGS - FEBRUARY 2014

Annual statistics for diamond jewellery sales in 2013 indicate that the industry is still faced with an uncertain global economic situation.

Whilst there was some modest sales growth, it has been at the expense of prices with the industry indices indicating that the prices of benchmark 1 carat polished actually fell during the course of the year.

Social changes in response to economic uncertainty are also beginning to have an impact. It appears that fewer couples are getting married in the US, still the world’s largest market, and this is having an effect on the sales of diamond engagement rings. It is yet to be seen whether or not this is a long-term cultural change.

Growth in emerging markets, which has sustained the industry in recent years, has also slowed, particularly in India where a weakening Rupee and a lack of banking liquidity have had an impact on both manufacturing and consumer demand.

Even China has seen a slowing of its economic growth as it is affected by decreased global demand for the products it manufactures and exports. This in turn has had an impact on local demand for luxury products including diamond jewellery.

Rough diamond markets continue to be dominated by two major players – Alrosa and De Beers – both recording increases in production during 2013 of around 10%. They have been encouraged by rising prices, although many believe that rough prices continue to be out of step with what can be achieved in polished sales.

By the final quarter of 2013 De Beers completed its move to Botswana, with its international sales (sights) now taking place there. It is to be seen what positive impact this will have on South Africa.

Botswana has also established its own state diamond trading entity – Okavango Diamond Company (ODC). Given the quantities available to it, up to 12% of Botswana’s production, it is likely to become a significant source of supply in regional diamond markets.

Diamond Production – South Africa
Based on the State Diamond Trader’s inspections, South African diamond production rose by 20% in carats and 16% in value during 2013.

However, in terms of carats, South Africa is still only producing half of what it was in 2007.

The rise in production does not appear to have been accompanied by a rise in rough diamond prices, with the average price of rough diamonds inspected by the State Diamond Trader falling by 3%.