New diamond mines may force rough prices down next year because of increased supply, according to Panmure Gordon.
Three mines in Canada will enter the rough market early next year: Firestone Diamonds’ Liqhobong mine, Stornoway Diamond Corporation’s Renard mine and the Gahcho Kué deposit, owned by De Beers and Mountain Province Diamonds. The projects are estimated to produce about 7.1 million carats per year combined.
Coupled with rough producers’ revised output plans across the industry and other mine expansions, global production in 2017 may jump 2.5 percent to 130 million carats, analyst Kieron Hodgson predicted.
“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.
Even so, the bank predicted rough prices will fall 5 percent this year and recover by the same proportion in 2016, assuming sales are stronger this holiday season. But the increased production will take its toll should revenues falter between Diwali and 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, explaining that lower-value rough diamonds are more susceptible to price declines because they are more vulnerable to the impact of synthetics.