Industry News by Nemesis

Declines in Polished Prices, Rough Diamond Supply Continues in December

December 15, 2015

Early reports are that De Beers stuck to restricted supply of rough diamonds at the December sight this past week, according to polishedprices. Alrosa has been following the same line, although some boxes were reportedly slightly more expensive but better assorted at the last sale. Meanwhile, RBC Capital Markets said the difficult market conditions for smaller goods were likely to continue for some time.

 

“That Petra held back sales suggests pressure on cheap goods will continue for a while,” RBC said. This underlines De Beers' strategy to boost Jwaneng output rather than Orapa; the latter mines lower-quality stones. Rio is deferring output at Argyle for the same reason,” it said.

 

Polishedprices also reports that, "Dealers said polished trading activity increased since the Diwali break. With virtually no manufacturing output in India during Diwali, polished supply coming on to the market has been significantly lower, leading to shortages in certain ranges. However, the outlook remains cautious."

 

Meanwhile, the overall polishedprices index, continued to weaken throughout the week, to record its lowest value since May 2010. The main polishedprices index opened down 0.7% over the previous Monday at 122.4 points. The overall index is currently 9.8% below its level this time last year, and has lost 9.1% since the start of 2015.

 

One carat diamonds continued last week’s weakness with again all categories in negative territory. 0.5 carat ranges fared well, however, with Fine, commercial and Mixed ranges gaining 3.7%, 1.6% and 0.3% respectively.

 

Weekly Market Report: 

 

DIAMOND MARKET OVERVIEW

 

Dealers said polished trading activity increased since the Diwali break.  With virtually no manufacturing output in India during Diwali, polished supply coming on to the market has been significantly lower, leading to shortages in certain ranges. However, the outlook remains cautious. Bain & Co published a report about the global diamond industry saying the Chinese market will likely stay flat in 2016 before an anticipated recovery in 2017. According to the report, the industry is expected to show 4 - 5.5% annual growth through 2030. This projection is down from about 7% in previous Bain forecasts, it said. The main polishedprices.com opened down at 122.69 on Friday, from Monday’s opening at 123.79

 

ROUGH MARKET

 

De Beers stuck to restricted supply at the December sight this past week. Alrosa has been following the same line, although some boxes were reportedly slightly more expensive but better assorted at the last sale. In the secondary market, trading activity appears to have improved slightly. “It looks like we are slowly waking up to a ‘do’, rather than a ‘don't’ trading pattern,” said one trader in Antwerp, adding though that sales were still being done on long credit terms of between 60 and 120 days.  In particular, for manufacturers who want their cycle covered, these extended credit terms were unsustainable, he said. Meanwhile, RBC Capital Markets said the difficult market conditions for were likely to continue for some time. “That Petra held back sales suggests pressure on cheap goods will continue for a while,” RBC said. This underlines De Beers' strategy to boost Jwaneng output rather than Orapa; the latter mines lower-quality stones. Rio is deferring output at Argyle for the same reason,” it said. 

 

CORPORATE AND EVENTS

 

Anglo American Plc, one of the world’s biggest mining companies, is shrinking to a fraction of its former size to cope with the collapse in commodity prices, Bloomberg reported. The company is selling assets, closing mines and will eventually employ 50,000 people, compared with 135,000 now, Chief Executive Officer Mark Cutifani said on a conference call with reporters, without giving a time frame. Anglo also scrapped its dividend for the second half of this year and for 2016, the Bloombergreport said. 

 

Anglo American's plans to shut or sell dozens of loss-making mines have failed to halt a dramatic slide in its share price and it may need to sacrifice stronger parts of the business or raise cash from shareholders to pay down its debt, Reuters reported. The company, which grew from gold fields near Johannesburg to dominate diamond, platinum and, to some extent, iron ore markets, is one of many miners struggling with a fall in commodities' prices driven by lower demand from China, said theReuters report. That makes selling assets that much harder, it said.

 

De Beers announced the appointment of Nimesh Patel as Chief Financial Officer. Patel succeeds Gareth Mostyn, who will take up the role of Executive Head of Strategy and Corporate Affairs in the New Year, De Beers said in a statement. Nimesh joins from Anglo American where he was Group Head of Corporate Finance. Prior to joining Anglo American, Nimesh spent 15 years in investment banking at JPMorgan and as a Managing Director at UBS. “Having been closely involved with De Beers for a number of years in my previous role, I look forward to working with Philippe, the Executive team and our many partners and stakeholders as we deliver on our strategy and continue to play a leading role in the industry,” Patel said.

 

South Africa's mining ministry asked Anglo American to explain the impact of its restructuring plans on jobs and how the layoffs could be avoided, after the firm outlined a plan to sell assets, Reuters report. "The Department is thus awaiting a detailed presentation from the company in this regard, which should include the impact on jobs and measures to save them, transformation as well as other national imperatives," the ministry said in a statement, according to the Reuters report.

 

Debswana has reduced its forecast for 2016 production from 21 million carats to 20 million as the diamond giant seeks to reduce the oversupply of polished stones upstream in the market that has weakened prices this year, Mmegi reported. For 2015, Debswana had forecast production of 22 million carats. However, a senior finance ministry official revealed in October that the figure had since been revised to 21 million, the Mmegi report said.

 

Mountain Province Diamonds said that development of the Gahcho Kué diamond mine is progressing according to plan and budget with the overall project more than 80 percent complete and on track for first production during H2 2016. It also said 41 Snap Lake employees had been transferred to Gahcho Kue. "Mountain Province was advised early last week of the planned cessation of operations at the De Beers Snap Lake mine and the opportunities this would afford selected Snap Lake employees to be hired at Gahcho Kué. Forty-one Snap Lake employees have been transferred to Gahcho Kué and a further 60 will be transferred next year as the mine prepares for production," it said in a statement.

 

Petra Diamonds said the exceptional 23.16 carat pink diamond recovered from the Williamson mine in Tanzania in November has been sold into a partnership, with Petra receiving US$10,050,000 (US$433,938 per carat) for the rough stone, as well as retaining a 20% interest in the sales proceeds of the polished, the company said in a statement. The diamond was bought by Golden Yellow Diamonds on behalf of M.A. Anavi Diamond Group, a leading diamond manufacturer and specialist in large and unique coloured diamonds, Petra said. 

 

Source: The Diamond Loupe and Polished Prices

 

 

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