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DeBeers issued a warning on Tuesday stating that global diamond production will start to decline from 2020, which may lead to higher jewelry prices.
According to Agence France-Presse, the company said that the recent lack of major new diamond mining discoveries that diamond output may not meet the growing demand for diamonds in the United States, China and India.
DeBeers diamonds (above)
“Unless there will be major new mine discoveries in the next few years, diamond supply is expected to decline gradually from 2020,†DeBeers predicted a difficult period for the industry's $85 billion annual output.
The existing mines in Botswana, South Africa and Namibia are gradually depleting, and deeper excavation demand has led to a reduction in operating profit.
DeBeers said that prospecting has now moved to Angola, the Republic of the Congo, Zimbabwe, the Arctic Circle and Canada.
But the last major mine was discovered in India 10 years ago, and the mine is still in the unfinished project bank of Rio Tinto.
Despite this, the supply shortage may not be bad news for Luxembourg-based DeBeers, which accounts for 33% of the world's original diamond sales.
Demand from the United States, the world's largest diamond market, and the growing demand for diamonds in China and the Indian middle class are likely to create a seller's market.
“Even if the global economy is in an unstable or weak situation, diamond demand will continue to grow positively over the next decade,†DeBeers said.
China is the fastest growing country in demand, jumping from less than 3% of its market share in 2003 to 15% of the world diamond market.
However, DeBeers CEO PhilippeMellier said that China is not expected to replace 40% of the US market share in the next decade.
“As a major driver of demand growth, China and India clearly have the same market share as the US in the next 15 years,†said Mellier, who is attending the jewelry fair in Hong Kong.
"China's market share wants to grow to 40%, there is still a long way to go," said Mellier, who expects China's market share to grow at a rate of 10% a year for "many years."
DeBeers said that China's anti-corruption campaign, which has led to a decline in demand for luxury goods, will not affect the diamond industry.
“Compared to other industries, I think we have been less affected,†said Stephen Lussier, CEO of Deeverers Forevermark, because diamonds are usually only used in weddings and other “emotional events†in life.
DeBeers' first diamond report shows that global diamond jewelry sales in 2013 were approximately $79 billion, a 2% increase from 2012.
Diamond jewellery sales are expected to continue to grow in the long run as the US economy recovers and the mid-markets in China and India develop.
DeBeers was founded in South Africa in 1888 and had an operating profit of $1 billion last year – more than double the 2012 operating profit.
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