Rough prices may decline next year due to a rise in supply as a result of new diamond mines coming on stream, according to UK analysts Panmure Gordon.
Three mines, two of which are in Canada, will start streaming goods to the rough market early in 2017, according to the report as cited by Rapaport News.
These are Firestone Diamonds’ Liqhobong mine in Lesotho, Stornoway Diamond Corp’s Renard mine and the Gahcho Kué deposit, owned 51-49 by De Beers and Mountain Province Diamonds. The projects are estimated to produce approximately 7.1 million carats per year combined.
With rough producers’ revised output plans across the industry and other mine expansions, production worldwide next year could rise by 2.5 percent to 130 million carats, according to Panmure Gordon analyst Kieron Hodgson.
“The risk for rough prices to be repriced lower because of the increasing supply is higher than at any time in the last 24 months, in the absence of a commensurate decline in supplies from existing producers,” Hodgson wrote in a research note, Rapaport reported.
The research firm predicted that rough prices will decline by 5 percent this year and recover by the same amount in 2017, assuming sales are stronger this holiday season. But the increased production will be felt if revenues fall between Diwali and the Chinese New Year.
“With the new production coming on in early 2017, there may be certain categories that come under pressure, such as lower-value, commercial goods,” Hodgson said. He explained that lower-value rough diamonds are more susceptible to price declines due to the impact of synthetics.
