BOD mentioned in UBS Diamond report8 Jul 2014 07:52
Global Diamonds
Industry Expert Call Takeaways
- Global diamond industry call
BS hosted Robert Bouquet (20 years with DeBeers, Rio Tinto in Antwerp, and currently independent non-exec on BoD of Botswana Diamonds). Robert shared his view of the diamond industry and current trends. The market is in a generally upbeat mood currently with price increases accepted by industry.
- Diamond pricing healthy
+7-10% YTD and DeBeers openly said it will not be putting-up prices anymore until year-end. However, if other producers continue increasing prices it will be difficult for DeDeers to resist. Counterintuitively, buyers seem to like these price increases given that value of own inventories is also increasing. On the way up, this creates a virtuous cycle effect. Diamond trading increased (post mid-2000s) where diamonds can change multiple hands before being shipped to polishing and cutting. This resulted in more frequent bubble-like price forming – most recent burst in mid-2011.
- ALROSA looking for growth
Alrosa is scoping for exploration options in Africa, including through a world-class exploration/geological team in a JV with Botswana Diamonds. Alrosa has industry-leading technical ability; the hope is that this will eventually be combined with a significant discovery. However, the deficit of good diamond discoveries remains a challenge for the market globally and Alrosa in particular.
- Key diamond market risks/events
Overheating can be a risk, especially if prices continue to rally potentially putting pressure on the solvency of manufacturers. Lab-grown diamonds are yet to impact the market, but they are not viewed as a major threat in the short term. Two-tier marketing strategies considered for artificial diamonds to protect the natural market. There is a tendency for diamond producing countries to force the producer to support manufacturing at home, but this requires producers selling higher value stones locally. Key event to follow are India (IIJS) & HK trade shows at end-July & in Sept. HK trade show is important for polished prices. Q3 tends to be strong but DeBeers trying to take froth out.
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