Diamond Demand and Prices to Increase
November 25, 2006
For the first seven months of this year, polished diamond prices continued to increase compared to the same months last year but August through October have seen prices fall compared to last year. Polished diamond prices peaked in the fall of 2005 and the worldwide market has softened since that time. The lower prices are the result of a slowing global economy (expected to continue to 2007) and high interest rates, which limit retail inventories and reduce consumer purchasing power. Even though the 2006 retail holiday demand for diamonds is expected to be strong, the high interest rates have kept jewelers’ inventories lean. The result could be weak sales despite the strong demand.
While polished diamond prices have declined in recent months, prices for rough diamonds have held steady. This has created intense pressure on diamond cutters and polishers who were already feeling the financial burden of rising interest rates.
At the recent World Diamond Conference held in Perth, diamond production projections for 2010 are $11.3 billion compared to $12.67 billion estimated for 2005. In other words, production of diamonds will be down more than 10% from today’s levels. At the same time, demand projections are growth increases by as much as $5 billion. The supply shortfall could be as much as $3 billion by 2008 and $6 billion by 2010. This is the first time in 25 years that world diamond production is on the decline.
With these large supply shortfall projections, prices for rough diamonds are expected to rise significantly by 2008 if not sooner.
With prices expected to be on the rise, what is the diamond industry doing to increase supply? The key to the supply question lies with exploration. There has been no major diamond deposit discovery for 15 years. The last big discovery was in 1991 at Point Lake in Canada’s Northwest Territories, which led to the large mines in the area like Ekati. However, resources at the Ekati mine are expected to be depleted by about 2015 and there are no major finds to replace them. Diamond mines are very capital intensive and take years to put into operation once the diamond deposits are verified. Unless diamond exploration is accelerated soon, the shortfall projection will become reality.
My advice to diamond shoppers is to enjoy the relatively stable prices we have now. In the future, we will be talking about 2006 as the good old days of low diamond prices. Diamond prices in future years will be soaring, especially for larger diamonds.
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Posted by: Diamond Engagement Rings | February 09, 2011 at 01:31 AM