Global market for diamonds shows signs of oversupply


Rapaport May 2017 analysis of global diamond trading has raised concerns that the global market for diamonds is likely to record imbalance in the supply of rough and polished diamonds during the second quarter of 2017, a development which could negatively impact Botswana and other countries which depend on diamonds export revenues.

Recent analysis by Rapaport International, a research entity in the diamond industry, shows that during Q1 2017 supply of rough diamonds to the diamond polishing industry was high and exceeded demand for polished diamonds.

According to the analysis, trading and demand for polished diamonds continues to decline with recent statistics showing that the volume of polished exports from biggest suppliers such as Belgium, fell by 13% year on year during Q1 2017, while imports dropped by 6%. India, which has the world’s largest diamond manufacturing sector, saw polished exports declining by 5%. Rapaport analysts indicate that the polished diamond markets is expected to continue to realign to lower levels of demand while diamond jewellery market also decrease in size.

It has emerged from Rapaport analysis that some of the biggest markets for rough diamonds, the US and Canada continue to shrink as the number of jewelry businesses in North America, the US and Canada consistently declined through 2016. The number of North American jewellery businesses fell by 6% year on year to 27,706 during the first quarter while in the US, the number of companies operating stores declined by 5.6% to 19,969 after 318 businesses shut down operations, according to Rapaport.

Rapaport analysts have indicated that of the total closures, 277 occurred simply because the companies ceased operations, seemingly due to older jewellers retiring without anyone to take over the family business, seven jewellers went bankrupt during the period, while 34 closed due to a sale or merger.

“Some industry players have pointed out that the trend still marked an improvement from a year earlier, when 380 businesses closed up shop. However, the bottom line is that the industry continues to get smaller, with far more businesses closing than opening. The wholesale and manufacturing sectors shrank by 6.4% and 7.8% respectively,” states Rapaport senior analyst Avi Krawitz.

Rapaport has indicated that while demand in polished diamond is declining and the jewellery industry getting smaller, diamond mining companies are raising production, sparking concern about a looming oversupply of goods in the market. Rapaport estimates that rough diamond production will rise by 12% in 2017, based on the mining plans of the top five miners; Alrosa, De Beers, Rio Tinto, Dominion Diamond Corporation and Petra Diamonds.

Rapaport revealed that the projection does not take into account new mines that have come on stream this year, such as Mountain Province’s share of the Gahcho Kué mine in Canada, Stornoway’s Renard mine and Firestone’s Liqhobong mine in Lesotho, which combined will add some 3 million to 4 million carats this year.