Analysts Expect Flat Rough Prices in 2019

RAPAPORT... Rough-diamond prices will remain sluggish this year as themarket challenges that arose in the second half of last year are set to continue,two investment banks have warned.Prices are likely to drop 1% to 2% in the first half of2019, before recovering to end the year flat, analyst Kieron Hodgson atLondon-based Panmure Gordon said this week. Prices rose 2% last year due to astrong first half, but the market slowed in the second half. In addition, arise in mining production over the last two years has led to supply outweighingdemand, especially in smaller categories, he noted. Midstream sentiment is weak due to low liquidity andmargins, tight bank lending, weak polished demand and high inventory levels, Germanbank Berenberg explained in a report Tuesday. The RapNet Diamond Index (RAPI?,,?)for 1-carat polished diamonds fell 2.6% in the second half of 2018, while RAPIfor 0.30-carat stones slumped 9.9%. The 1-carat index has slipped 0.4% sinceJanuary 1. Meanwhile, rough-diamond production has peaked since threenew mines - Gahcho Ku?(C) and Renard in Canada, and Liqhobong in Lesotho - came onstream in 2016 and early 2017. Global output grew by between 1% and 2% to 153million carats in 2018, and will increase slightly to 154 million carats thisyear, Hodgson estimated. Miners now hold larger volumes of low-value rough thanthey used to, he added. Berenberg's London branch backed the downbeat forecast, predictingflat rough prices this year and next. The supply drop resulting from mineclosures in the coming years - such as the Argyle deposit in Australia, whichis due to run out in 2020 - won't lift rough prices until 2021 or 2022, Berenberganalysts Richard Hatch, Laurent Kimman and Michael Stoner wrote Tuesday. "Between now and then, pending supply shocks, we think theprospects for material price uplifts for rough are limited," they forecast. As production declines from next year on, rough prices arelikely to climb, both banks predicted. Panmure Gordon sees prices rising 2% in2020 and 2021, while Berenberg expects stability until 2020, a 0.75% increasein 2021, and 2% growth in 2022. Image: The Gahcho Ku?(C) mine in Canada. (Mountain Province)