Demand for rough diamonds may take two years to restore after falling this year by 2% due to the passivity of jewelry retailers, FINMARKET.RU cites the report from VTB Capital.
The depletion of the Argyle diamond mine, which is located in Australia and produces small diamonds, can positively affect the profitability of diamond mining companies.
The report says that despite the fact that prices for small diamonds stabilized in the first quarter of 2019 after falling in 2018, the market continues to suffer from an overabundance of stone reserves, which at the end of 2018 were estimated at $ 3.7 billion, and also because of the low jewellery demand in China.
Low prices for diamond products also affected the profitability of the cutting sector.
“The largest diamond miners increased the rejection rates to 40%; De Beers accumulated about 700k carats in stock in the 1st quarter of this year. In 2019, the price index for diamonds, according to VTB Capital, will decrease by 4% (1% in each of the quarters),” the report said.
However, the depletion of Rio Tinto’s Argyle mine by 2023, which produces and sells small diamonds at an average price of $15 per carat compared to the world average of $100 per carat in 2018, as well as a decrease in cutter’s rough diamond reserves over two years, will boost the demand on diamond market.
The closure of Argyle will positively affect ALROSA's revenue, 35% of which is accounted for by stones less than 0.75 carats.