Diamond Production likely to slide by 4%
According to the ninth annual report on the global diamond industry, between 2010 and 2016, global production was consistently between 120 million and 130 million carats. In 2017, it jumped to roughly 152 million carats and then fell 3% to 147 million carats the following year. The decrease in 2018 is largely attributed to lower production in Australia, the Democratic Republic of the Congo and Russia.
The unexpected closure of Mir in Russia and planned downscaling at Argyle in Australia contributed to the decline. The 26 million–carat production increase in 2017 was the largest single-year volume increase since 1986, and it created a surplus that affected the entire value chain.
As a result, inventory in the mining and midstream markets increased through 2019. Prices and revenues declined in both segments in 2019 despite only a slight decrease in consumer demand. Assortment sales shifted toward smaller stones in 2019, which also contributed to lower sales.
In 2019, production is expected to drop an additional 4%. Production is depleting at Argyle in Australia; in South Africa, Venetia is transitioning from open pit mining to underground; and production levels were lowered at Orapa in Botswana. These changes will be partially offset by increased supply from several Alrosa mines in Russia and smaller players in Angola.
During the first half of 2019, pressure on rough diamond prices, sales mix and sales volume led to lower adjusted EBIT (earnings before interest and taxes) margins for most producers. Alrosa maintained the highest margin in the rough diamond production segment. Rio Tinto and several other junior miners with high shares of small-gem- and near gem-quality diamonds reported negative EBIT margins in the first half of 2019.
“We expect the supply of natural diamonds to decline substantially starting in 2021, with an annual decrease of
8% compared with 2020 projections. The downward trend from the past few years will be amplified by supply contraction at Argyle and at Diavik and Ekati in Canada.
