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While demand for diamonds worldwide is expected to grow slightly next year, the outlook for rough production is less certain.
De Beers is unsettled going into 2013 after the resignation of the CEO of its corporate parent, Anglo American Corp. Cynthia Carroll also had been named De Beers’s chairman shortly before stepping down, and with no heir apparent, it is uncertain who will lead Anglo.
De Beers has already trimmed production by 20% this year, partly in response to market conditions—namely the liquidity crunch of diamond manufacturers, who face softening polished prices and difficulty financing their inventories. The company mined 19.8 million carats through the first nine months of this year, compared to 24.8 million carats last year. The decline was sharper than forecast because an accident at Botswana’s Jwaneng mine that delayed mining operations and will result in De Beers mining less than 30 million carats this year.
At the same time, Russia’s Alrosa announced its yearly production would remain stable at just over 34 million carats. Alrosa does not adjust mining operations to market conditions, but instead sells its excess production to the Russian government stockpile, Gokhran.
The mining companies are hoping that Christmas and Chinese New Year demand is strong enough to strengthen polished prices and provide some badly needed liquidity. If the season falls short, De Beers, Alrosa, and other diamond mining companies will continue facing the dilemma of whether to mine and sell at lower prices, or keep some goods in the ground for better times and higher profit margins. www.gia.edu
