Global slump forces cut in diamond supply

Written by Dhimant Bhatt | Mumbai | Updated: Dec 14 2008, 05:27am hrs
The global financial slowdown is causing a strain on players throughout the diamond value-chain. DTC and Alrosa are one of the major global rough diamond suppliers in the world market. To meet the biggest challenge of maintaining current production level with low demand, the Diamond Trading Company (DTC), a marketing arm of De Beers, has reduced its supply of rough diamonds to $100 million for December sight, which is lowest seen in recent months. DTC will cut production to level its supply with demand. The company has decided to scale back production at its mines in Canada and Botswana. The company has cut its total rough diamonds supply by nearly 9% to $5.54 billion (in value terms) for the full year of 2008 over the previous years figure of $6.07 billion.

DTC has increased its value of rough diamond sight to $725 million for the month August, which is the highest sight during the current calendar year. Subsequently, it reduced to $100 million for December 2008 as against $300 million for November sight, as demand has dropped significantly in the current economic scenario. There is no demand for rough diamond at the moment and the inventory levels of polished diamond is very high. Local prices of rough diamonds are comparatively high and demand for polished diamonds, both at export and local markets, has declined considerably, a local diamond supplier said.

DTC has not made a major pricing adjustment since raising prices at its July sight, when it raised them by an average of 5% and up to 15% on larger goods. At the time, the company reported that average prices had increased by 16% in 2008, according to a Rapaport News report. Low demand and higher supplies of rough diamonds in the country has forced the domestic industry to halt imports of rough diamonds for a month from November 25. Such stoppage of import will help the industry face the challenge that has arisen out of the turmoil in the global financial market, Vasant Mehta, chairman, GJEPC, said. The countrys total rough diamond import has reduced to 81.47 lakh carats from 96.30 lakh carats for the month of November 2008.

Russias Alrosa, the worlds second largest diamond mine, also said in an announcement on the company web site, that they would follow the De Beers move by an initial cut of rough diamond supply by as much as 40%, representing $600 million, before Christmas.

Alrosa has been reluctant to cut its rough prices. It announced last month that it would reduce its sales by upto 40% and sell excess stock to state repository Gokhran instead, company said. Russia exported 22.84 million carats of rough diamonds during the first nine months (January-September) 2008.