Diamonds aren't forever? De Beers to cut supply

[AndreaGail]

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http://www.cnn.com/2010/BUSINESS/04/25/diamonds.debeers.cut.ft/index.html?section=cnn_latest

(FT) -- De Beers believes that the supply of diamonds is running out over the long term, prompting the world's biggest miner of the gems to reduce production in an attempt to extend the life of its mines.

Assuming the move moderated production, rough diamond prices could rise by at least 5 per cent per year for the next five years, said Des Kilalea, analyst at RBC Capital Markets.

De Beers' move, which will see production plateau at about 40m carats a year from 2011 compared with 2008 production of 48m carats, anticipates new Asian demand accelerating the depletion of the world's existing diamond mines, said Gareth Penny, managing director.

For 20 years the industry has found no new diamond deposit to match De Beers' two biggest mines in Africa or the best Russian mines of Alrosa, the other big diamond producer.

"Do we want to ramp production back up to 48m carats, given the lack of availability in the future?" Mr Penny asked. "Diamonds are a treasure of nature that should be properly protected, because there will be less to sell. The reality is that supply cannot keep up, and that will become very accentuated over the next 15 years."

De Beers, while no longer a cartel, accounts for 40 per cent of global rough diamond sales. After a brutal year for the industry, which pushed De Beers to a net loss for 2009, the company stands to gain over the next five years from what Mr Penny calls "a natural supply-demand imbalance".

Diamond analysts also read the move as a precursor to the privately held group relisting, because it improves its production profile over the long term. "If the De Beers shareholders are planning to go public next year, this might be timed with the beginning of the renewed growth of consumer demand," said Chaim Even-Zohar, a Tel Aviv diamond consultant, who says?De Beers is certain to relist.

China's affluent urbanites are buying diamonds in droves and the country's share of the diamond jewellery market should double to 16 per cent by 2016, De Beers said. The company has emerged from the downturn with a halved cost base and a new strategy centring on protecting the value of diamonds.

"We are not seeking to manipulate anything," Mr Penny said. "But there is a natural supply-demand imbalance that is leading to certain realities."

World rough diamond production last year was 124m carats, according to Mr Even-Zohar.

© The Financial Times Limited 2010

I wonder if they payed cnn in carats or shekels towrite this lol

[Ash_Williams]

Hahahahah.

Ooo we all better run out and buy diamonds now!

[jedemdasseine]

Thanks for the article. I love following the diamond industry, especially the latest PR moves by De Beers. "See? We're not a cartel? See? See?" lol.

Diamonds running out? Ha! That's funny. :D
This latest PR stunt is probably meant to oppose various Russian and Asian interests in some way. Don't know, though. All the money is laundered through Israel and London, and illegal rough has never gone away.

The low-carat diamantaires in India and the anti-De Beers folks in northern Canada have done well to bitch slap De Beers over the last 20 years, but De Beers still controls the racket through endless shell companies. South Africa and Southern Africa are still lucrative, and everyone from the Oppenheimers to Tokyo Sexwale knows it.

[MNeagle]

Peak diamonds. Yeah right. :sarc:

[Awoke]

What is truely amazing is that people fall for this crap.
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[FreeEnergy]

I am sure they can mine their own vaults for diamonds for another 100 years or so.
They've been stockpiling 'em in huge numbers, and the prices are RIDICULOUS.

Maybe the right angle of this article is this "nobody buys our diamonds anymore at outrageously high prices we used to, so we'll call it 'mine depletion', just like oil guys do". heh, they also "anticipate asian demand" which probably didn't materialize, asian women are not as stupid as american are "diamnods are forewer, you need three diamond engagement rings"...oh brother, what a racket!

[jedemdasseine]

Asian demand for diamonds is very high and increasing, but Asians aren't as willing to pay absurd markups for average stones. Asians typically want either exceptionally large, inclusion-free diamonds, of which there are very few, or they want cheap, small stones for quasi-costume jewelry. The former are always in demand, yet part of a tiny, exclusive market that the average Asian has no interest in; whereas the latter is the fastest growing area of the diamond business, and one over which De Beers doesn't have as much control. Small, cheap diamonds used to be discarded by De Beers or sold in bulk for industrial use, but diamond cutters in India have found ways to make huge profits from cutting the low-quality rough that would have been discarded just a few decades ago. The Indians will work very cheaply, they're good a what they do, and they sell these small diamonds for pennies on the dollar compared to De Beers prices (which are set by archaic, byzantine formulae). The small stones, after being cut, are used to add "sparkle" and "bling" to cheap Asian jewelry. No solitaires, but more of a rhinestone effect. Ladies shopping the discount malls of Asia don't care about clarity or carat weight. They just want something that looks pretty. And they can say it's real, not glass. De Beers' marketing over the past century, which has been spectacular for the most part, never accounted for this new type of Asian demand.

[Ash_Williams]

Since Asian demand is up, another factor could emerge...

In America there is at least one company that can produce perfect diamonds in the lab, they can't be distinguished from "real" diamonds because they are real diamonds. Right now this company engraves a tiny marking on each diamond they make so that people can tell them apart from mined diamonds. If the chinese were able to figure out the process, I doubt anything would stop them from pumping out "knockoff" diamonds by the ton.

[silver_surfer]

Wasn't there just a recent story about Russians looking for oil found diamonds all over the ocean floor.

[DMac]

If ever there were a Rothschild scam, it be diamonds, forever.

:puke

[FreeEnergy]

Wasn't there just a recent story about Russians looking for oil found diamonds all over the ocean floor.


It is probably a De Beers disinfo. Russians actually manufacture diamonds, to a quality that is practically indistinguishable from "original", and at a 1/10th of a cost. You'd need a spectro-something equipment - which isn't even commonly available, and even then it isn't a 100% proof - to identify "real" from manufactured. For a while De Beers was able to purchase most of their output to maintain worldwide monopoly in diamonds. It would be really undesirable for them if the word got out to customers that De Beers is basically selling russian manufactured diamonds...what a bummer it would be ;D

Just one of many sources:
http://www.solstardiamond.com/articles/synthetic.htm

[Nomen luni]

Here's the play, folks... we all know the diamond and precious metals markets are both controlled. In the near term, give or take, the price will generally go up. As fiat collapses, money will rush to these assets, then the cabal will crash the value so investors are sat on worthless assets.

[DMac]

http://www.urbandigs.com/kondratieff-winter.jpg

[Ponce]

To me diamonds are like the beads given to the indians to buy NY.

Remember that in the last depression people were selling Roy Royce's and diamonds for pennies on the dollar.

[Olmstein]

I'm still waiting for prices to fall so I can get my bling. (http://www.glassgiant.com/bling/)

[Saul Mine]

Well, let's see what we got:
* The mines crush the ore before sorting, so it's very unlikely to find any more big diamonds.
* The world is flooded with little diamonds.
* There are about a dozen materials, natural or man made, that look exactly like diamond only better, but are ridiculously cheap.
* There is very little market for used diamonds unless they are rather big and very good. What little market there is is hard to find.
* You can NOT identify a very good diamond after it is set. Even an expert can't identify the top nine colors once the stone is in a setting.

Conclusion: Don't buy a diamond thinking it will have any resale value at all. Unless of course you are an expert in the business, in which case you probably would not be reading my advice.

[Ash_Williams]

It is probably a De Beers disinfo. Russians actually manufacture diamonds, to a quality that is practically indistinguishable from "original", and at a 1/10th of a cost. You'd need a spectro-something equipment - which isn't even commonly available, and even then it isn't a 100% proof - to identify "real" from manufactured. For a while De Beers was able to purchase most of their output to maintain worldwide monopoly in diamonds. It would be really undesirable for them if the word got out to customers that De Beers is basically selling russian manufactured diamonds...what a bummer it would be

They always claim they can spot the "fakes" with increasingly fancy equipment. The market dies the day people ask one question "Who cares?" This rock might have come out of the ground or out of a lab and no person can tell without a 100k piece of machinery. It's not one of those cases where the "real" one will last longer or look better, and people are simply going to stop caring. Celebrities with their huge diamond engagement rings are going to look like idiots when a welfare queen can buy the same thing from Walmart.