There are sure signs in the diamond industry that diamond prices at the consumer level will be raising for the next several years. When the price of rough diamonds goes up, the price for finished (cut and polished) diamonds at the consumer level are not far behind in increasing.
Average prices of rough diamonds are up ten percent from this time last year. There is about a 12 to 18 month time from when rough diamonds are purchased until they are cut and available on the retail market but price increases are often passed on even faster because wholesalers and retailers know the cost of new inventory will be higher than what they are selling today. The demand for diamonds over one carat is growing faster than the demand for average diamonds.
At some diamond mines like Gem Diamonds’ Letseng mine, the average price of diamonds is 35 percent greater than a year ago. This mine is known for producing larger sized diamonds, which indicates larger carat weight stones will be increasing much faster than smaller stones. If the average price of all diamonds goes up 10% a year, the price of larger diamonds (over a carat) will increase even greater than the average and finished diamonds over 4 carats in weight could 30% or higher annual increases.
As I have mentioned in many previous blog articles, the reason for the price increases is simple supply and demand. Global demand for diamonds is growing well in excess of five percent a year due in part by increasing consumer wealth in Russia, China, and India. At the same time, supply of diamonds is starting to decrease as older mines are coming to the end of their lives and not enough new mines opening to replace that production. There have been no major diamond kimberlites discovered in 15 years, since the deposits in numerous areas in Canada (Saskatchewan, the Northwest Territories, and Quebec). Exploration continues in Canada and new Canadian mines are scheduled to come on line for the next ten years but there are no new kimberlites ready for opening mines 10-20 years out to take up the slack in decreased production from the older mines.
Diamond exploration companies are spending hundreds of millions of dollars in search for the next new kimberlite discoveries but any new finds have lacked the world-class size necessary to meet the growing demand for diamonds. The bottom line is that diamond prices, especially for larger sizes, will be growing significantly for the next 5 to 7 years. Consumers will find prices higher than they were a year ago but should expect even greater increases in the next several years, especially for diamonds over one carat in weight.