Production by the world's largest diamond producer De Beers has been consistently going down past many years and as a result now India's DTC (Diamond Trading Company, rough diamond distribution arm of De Beers) sightholders are facing acute short supply of rough diamond this year. De Beers' is expected to produce 27.9 million carats in 2013 (carats equal to mined in 2012). These figures indicate a 43% decline as compared to its pre-economic crisis production in 2008.
De Beers diamond production went down by 21% as compared to the previous quarter De Beers has undergone many tectonic changes since it was established in 1888 and the latest and historic among them was its takeover by the Anglo American Company last year. Till the decade of '80s, De Beers' market share was 90% of all rough diamonds sold by value. The Company had a firm control over the mines of South Africa, Australia, Canada and Siberia. This share has come down to 35% today, thanks to a series of rapid changes in the world of luxury and mining. These changes are happening at a time when productions in most of its mines are dwindling. Ms. Varda Shine, the Executive Vice-President De Beers Global Sightholder Sales, in a report published in Times of India says, "As the Company has mentioned previously, the shortfall is due to the collective effects of the slope failure at Jwaneng mine, waste stripping and price reduction in Q3 2012. The Company has taken great exertion to explain this to its sightholders throughout the last Intention to Offer (ITO) period and all of them have been very understanding on this front." The latest production figures declared by the Anglo American indicate that its first quarter diamond production from De Beers raised 3% yoy to 6.4 million carats. The figures show improved grades, but that was offset by lower production because of planned plant maintenance done at the Orapa diamond mine in Botswana.
Diamond production went down by 21% as compared to the previous quarter, with the Venetia mine in South Africa got affected by excessive rain flooding. But the Company expects to recover the shortfall in the second half of 2013. Botswana's Jwaneng diamond mine continues to recover from the impact of its slope failure incident in June 2012 as a result of excessive rainfall at the end of 2012. Debswana's rough production fell by 8% yoy to 4.54 million carats, while Namdeb's production went up by 35% to 429,000 carats. As a result, Indian diamond manufacturers are consistently facing controlled supply of rough diamonds from De Beers. Industry circles from Mumbai and Surat say that the DTC sightholders are experiencing shortfalls in supply during the ITO from March 2012 to March 2013 in a range of 30 to 40%. The De Beers consider ITO as only the intention to offer; not a guarantee. In other words, if the Company offered ITO of 10 million USD worth of rough of specific size and quality in any of the sales month, sightholders only get $6 million of supply. It becomes very difficult to adjust the shortfall of 4 million USD worth of goods and as a result, their production at the factory is affected. At the same time, the diamond prices fell by 12% in 2012. Now diamond prices are set to get a lift in 2013 as De Beers has announced to constrain the supply of rough diamonds. A report by Bain and Co. says, "The global demand of diamond is estimated to grow at 5.9% every year through 2020 but the supply is expected to grow only at 2.7% during the same period."
Needless to mention then that the diamond manufacturers will have to ensure regular supply of rough from alternate sources to narrow the ever widening gap between demand and supply. Trade bodies like Gem & Jewellery Export Promotion Council (GJEPC) and ASSOCHAM have urged the Indian government to take up the issue on an urgent basis and ensure secure, reliable and adequate long-term supply of rough diamonds for India's diamond manufacturers through directly engaging with producer countries via various diplomatic channels of trade agreements.
