15
F I G . 3 :
D I AMOND SUPPLY AND DEMAND : PERSPECT I VES FROM TWO
I NDUSTRY ANALYSTS
Demand is set to strengthen rapidly, determined by the
recovery of consumer confidence in two key markets:
ƒ
The US, which represents the largest share of global
jewellery sales. All indicators point to the fact that
the US will remain strong going forward.
ƒ
China, which will underpin diamond growth in the
medium term, as penetration of diamond jewellery
pieces increases. Jewellery growth in China is
expected to remain robust, with leading retailers
such as Chow Tai Fook reporting 32 per cent higher
retail revenue over the 2014 Chinese New Year.
Production will be increased by a set number of projects
coming online including:
ƒ
Petra’s proposed expansion of Finsch and Cullinan,
which will lift production from ~3 million carats per
year in 2014 to over 5 million carats per year in 2019.
ƒ
Grib: 4 million carats per year.
ƒ
Gahcho Kué: 4 million carats per year by the end of 2017.
ƒ
Renard: 1.5-2 million carats by the end of 2017.
Diamond demand is expected to expand at a
Compound Annual Growth Rate (CAGR) of 11 per
cent in nominal value between 2013 and 2017,
driven by:
ƒ
Cyclical recovery in US consumer spend on luxury
goods as economic growth recovers.
ƒ
Structural demand growth from emerging markets on
the back of higher penetration of diamond jewellery
among a growing middle class.
Global natural supply is expected to increase at an
average rate of 5.2 per cent between 2013 and 2017:
ƒ
Output in established mines falls as older mines come
to the end of their life or move to underground mining.
Going underground will make it difficult to maintain
existing output levels due to additional haulage time
and the technical challenges that come with
underground mining.
ƒ
New mines coming online (including Grib, Gahcho Kué,
Bunder, Karponskogo, Star-Orion South and Renard)
represent only 17 million additional carats per year.
Source: Goldman Sachs,
‘Get engaged with Russian diamonds: Initiating as Buy’,
9 December 2013
RBC,
‘Diamond Digest’,
4 March 2014
DIAMOND DEMAND
DIAMOND SUPPLY