Industry News
De Beers Executive Sees Signs of Diamond Market Revival
20/10/2009
De Beers sees recovery in the global diamond market, and the company’s mines in Botswana are now running at 80 percent capacity. This is despite the fact that consumers are not yet buying polished diamonds in the amounts they were before the economic collapse.
“Consumption has not improved to anywhere near the levels that we are accustomed to ... but the abrupt rate at which it [spending] was dropping has started to stabilize,” Sheila Khama, chief executive of De Beers Botswana told the Financial Times.
Khama said that diamond stocks held by polishers for different categories of rough were beginning to fall. Moreover,the independent polishing companies that buy rough diamonds for polishing and then sell them on to the retail trade had recently started to increase their purchases at the Diamond Trading Company (DTC) Sights.
“The pace of recovery is picking up in rough diamonds. We are seeing an improvement in the level of sales and the availability of finance to our clients,” she added.
She also dismissed concerns about the other potential big diamond producers, such as Alrosa, that may choose to unload large amounts of surplus stocks into the market, which would reduce prices and have a knock-on effect down the pipeline.
Although this is a slight improvement, it is important because the diamond trade was one of the worst hit industries by the recession.
As a result, De Beers, which mines about 40 percent of the world’s rough diamonds, temporarily closed its mines in Botswana in the early months of 2009 to reduce costs and supplies of rough to a cash-strapped market, creating a fresh demand for rough goods in the second half of the year.
Botswana is the world’s biggest producer of rough diamonds by value and derives about a third of its gross domestic product from the diamond mining operations. After De Beers reduced its production, Botswana’s economic output dropped by a tenth this year.
Khama said that recently there were increases in Sight sales in Botswana, which suggested increased confidence with retailers preparing for the winter holiday season — when the majority of annual diamond jewelry sales in the U.S. are made.
The company currently forecasts a 40 percent drop in annual production compared to 2008. Production in three of its mines in Botswana - Jwaneng, Orapa and Letlhakane - resumed in May. One mine located in Damtshaa, remains closed, however it accounts for only about 1 percent of output.
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