Diamond surge a ‘flash in the pan’

The world’s two biggest diamond-mining companies have just sold $1-billion worth of gems and it’s making smaller rivals nervous.

January offerings by De Beers and Russia’s Alrosa PJSC, which control almost two-thirds of the market, far exceeded everyone’s expectations. The sales were driven by supply cuts last year, which led to shortages, lower prices and better-than-expected holiday demand. But there are concerns it’s too much too soon for an industry still reeling from the biggest rout in seven years.

“It’s going to be very difficult to sustain the current exuberance of the market,” said William Lamb, the chief executive of the Lucara Diamond Corporation.

“We’ll most probably see diamond prices softening in the back end of this year.”

The smaller producers are at the mercy of the two biggest, whose market dominance helps them control prices by reducing output or withholding sales. About a quarter of global supply disappeared last year as miners tried to arrest an 18% drop in rough prices after China’s slowdown and an industrywide credit crunch curbed demand.

Helped by a 7% price cut, Anglo American-owned De Beers sold $540-million of diamonds in its first sale this year, more than twice its December offering and beating analysts’ expectations. Alrosa extended its January sale and shifted about double the $200-million to $250-million it originally planned.

“January was a good start on that road to recovery, but whether we’re firmly on that road, it’s too early for me to call that,” said Stuart Brown, chief executive of Firestone Diamonds and a former chief financial officer of De Beers. “Time will tell. You don’t get any prizes for being bullish in this industry.”

Last year was bruising for the $80-billion industry, with prices dropping the most since the global financial crisis in 2008. Cutters, polishers and traders said mining companies were still demanding more than many could afford to pay.

Prices should remain steady this year, said Paul Loudon, the chief executive of DiamondCorp. The London-based company plans later this year to revive the 1930s Lace mine in South Africa.

“Early this year, there’s real demand from the factories for rough [diamonds],” Loudon said in an interview in Cape Town. “It’s not sustainable. It’s not going to last for the whole year.”

De Beers in December said polished diamond demand would fall 1% to 2% in 2015 compared with 3% growth a year earlier. Tiffany & Co last month lowered its full-year profit forecast, and the Chow Tai Fook Jewellery Group, the biggest jeweller, has slowed expansion plans. – © Bloomberg News

Advertisting

Inquest into Neil Aggett’s death begins

The trade unionist was found hanged in his cell at the John Vorster Square police station in 1982

SANDF colonel accused of swindling colleagues in UN business scam

A senior soldier who is part of South Africa’s peacekeeping missions is accused by her colleagues of swindling them out of of hundreds of thousands of rands in a nonexistent business deal

Mass store and job cuts at Massmart

Changed market conditions and an appalling economy has hit low end cash-and-carry outlets

Courts to guide land expropriation

Two bits of law need to be approved before a court can decide if land owners will be compensated
Advertising

Press Releases

South Africans unsure of what to expect in 2020

Almost half (49%) of South Africans, 15 years and older, agree or strongly agree that they view 2020 with optimism.

KZN teacher educators jet off to Columbia University

A group of academics were selected as participants of the programme focused on PhD completion, mobility, supervision capacity development and the generation of high-impact research.

New-style star accretion bursts dazzle astronomers

Associate Professor James O Chibueze and Dr SP van den Heever are part of an international team of astronomers studying the G358-MM1 high-mass protostar.

2020 risk outlook: Use GRC to build resilience

GRC activities can be used profitably to develop an integrated risk picture and response, says ContinuitySA.

MTN voted best mobile network

An independent report found MTN to be the best mobile network in SA in the fourth quarter of 2019.

Is your tertiary institution is accredited?

Rosebank College is an educational brand of The Independent Institute of Education, which is registered with the Department of Higher Education and Training.

Is your tertiary institution accredited?

Rosebank College is an educational brand of The Independent Institute of Education, which is registered with the Department of Higher Education and Training.

VUT chancellor, Dr Xolani Mkhwanazi, dies

The university conferred the degree of Doctor of Science Honoris Causa on Dr Xolani Mkhwanazi for his outstanding leadership contributions to maths and science education development.