Diamond Deficit to Drive Prices, Alrosa Predicts

RAPAPORT... Prices of rough and polished diamonds will continue to rise amid a prolonged shortage in supply and strong jewelry demand, Alrosa said.Miners reduced rough-diamond production by 20% in 2020, leading to inventory depletion, the Russian company explained Tuesday in its annual report on the diamond investment market. Additionally, Covid-19 regulations forced lockdowns at some deposits, while the permanent closure of assets including the Argyle mine in Australia - which accounted for up to 10% of global output - also dented supply.In the first nine months of 2021, the shortage pushed up polished-diamond prices by more than 10%, the company reported."The diamond market has fully recovered from the pandemic," Alrosa said. "Conditions [are] favorable for sustained diamond price growth in the long term."Global diamond-jewelry sales for 2021 could rise up to 23% year on year, potentially surpassing $90 billion, the miner noted. A strong spike in appetite for diamonds from the two largest jewelry markets amid a recovery from the pandemic are driving the sales increase. Demand for jewelry in the US, which represents 45% of sales worldwide, increased 50% in the first nine months of the year versus the same period of 2019, the mining giant noted. In China, which represents 20% of global sales, demand grew 10%.The rough-supply deficit is expected to increase over the next 10 years, according to an outlook published by Bain & Co. and cited by Alrosa. That report gavetwo possible scenarios for production and demand: one conservative, one optimistic."Even if demand follows the conservative scenario, while mining production grows along the optimistic one, demand will still exceed supply by the second half of the 2030s," Alrosa added. "This means that the problem of the widening deficit will be resolved mainly by rising prices for rough and polished diamonds."Image: Rough-diamond sorting. (Alrosa)