Energy & Environment

Sunday, 24 July 2011 22:26

Diamond demand to outstrip supply globally

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Grave prospects lie ahead for the diamond supply industry worldwide as experts predict the flow to begin to slow to a trickle. With the ever-increasing gap between supply and demand, jewellers and mining companies have one aim in common: find a way to meet the demand for diamonds or lose out on business.
At present, only 17 primary diamond mines are in operation globally, but by 2012, this is predicted to reduce to only 12. The worldwide demand for diamonds is at approximately $13 billion and is expected to rise to $18 billion in the future.

Johan Louw of Uwe Koetter Jewellery comments on the imminent diamond shortage, “In most upmarket jewellery shops the diamond is the most important source of revenue. A shortage of diamonds would severely curtail our ability to operate and generate profits. We are feeling the slowing of supply in South Africa already. The best stones are leaving the continent at source to go to the Far East, Europe and America. In many cases we have to import the cut goods from those centres.”

Although diamonds are found in many countries, they are extremely difficult to recover, with 250 tons of ore yielding only a handful of diamonds. Only 20% of all diamonds mined are fine enough to be set into jewellery which compounds the problem of a shortage of diamonds.

The shortage of natural diamonds may encourage jewellers to buy synthetic diamonds. “Our aim is obviously to provide the best quality diamonds together with the best designs, but when sourcing good quality diamonds becomes too difficult, we may have to look into other avenues,” says Louw. “For now and the foreseeable future we do not supply synthetics. The diamond has a special power over people. This is because of its age and formation. It is a special gift of nature. The rarity, pureness and ‘naturalness’ creates the lore and romance that attracts people to it,” Louw elaborates.

Jewellery companies are likely to benefit from high demand because their prices can be set accordingly, however, if diamond supply hits an extreme low, even they may suffer. “People come to South Africa to buy jewellery because they believe it is inexpensive here. A shortage in good gems and competition from Dubai, India and China make meeting this expectation harder and harder,” explains Louw.

Diamonds are the most concentrated form of wealth negotiable anywhere in the world. More so, diamonds have come to be symbolic to cultures the world over and the demand for them is likely to increase as they grow rarer. It is well-known that people will pay almost any price to possess a diamond.

Louw speculates, “I predict that the public will buy more if diamonds are seen as a real investment. Another new market will then be created in people selling their diamonds which has increased tremendously in value.” The ever-increasing demand and failure to yield sufficient supply means that owning diamonds now is a good investment. With an increase in demand, the price for a carat will continue to rise in the next few years.

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