De Beers' output cut to create crunch in rough diamonds

2 May 2009, 2218 hrs IST, Melvyn Thomas, TNN


SURAT: While the Indian diamond industry hopes that demand for polished stones will improve in the coming months, the biggest diamond cutting and polishing hub of Surat is likely to face an acute shortage of roughs. Reason: World’s largest diamond producer De Beers has reduced its first quarter production by almost 91 per cent in 2009.


Surat imports an estimated Rs 30,000 crore worth of rough diamonds per annum 60 per cent is supplied by De Beers to its 30-odd siteholders having offices in Mumbai and Surat through its diamond marketing arm Diamond Trading Company (DTC). The reduction in the diamond production by De Beers will certainly translate into shortage of rough diamonds in the coming months.


“The reduction in diamond mining operation by De Beers is certainly going to create shortage of rough diamonds in the market. But we expect the upcoming Christmas season to bring some hope for the ailing diamond sector,” said a leading DTC sightholder.


As per the official data from Anglo American, a parent company that owns 45 per cent share in De Beers, the production fell 91 per cent in the first quarter of 2009 after the company decided to scale down its mining operation because of weak demand for rough diamonds, mainly from India and other diamond cutting and polishing centre in Israel, Japan, China, etc. The output declined to 1.1 million carats during the three months ending March 31, 2009, compared with 11.8 million carats in the corresponding period previous year.


De Beers responded by closing all its Botswana mines for six weeks and keeping two of its mines Damtshaa mine and Orapa No 2 closed until the end of 2009. Temporary suspensions of operation were also implemented at its Namibia, Canada and South Africa mines.


In light of lower market demand, De Beers reduced production at all its mines through a combination of production holidays and reducing shifts worked, allowing sales from existing inventories in order that sales demand was met.


De Beers mined 48.1 million carats of diamonds in 2008. With the scaling back of operations, the company expects a reduction of diamond output at its respective sites in Bostwana and Namibia by 60 and 50 per cent respectively.


Bharat Gosai, a leading diamond manufacturer, said, “The market has seen a slight improvement in the last one month. If this continues, then the demand for rough diamond is likely to increase before the Christmas season. However, the cut in the production is likely to impact the industry.”


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