Diamond prices are expected to rise on the back of an increase in middle- income customers, in China and India, who are interested in buying diamonds, says mining consultancy MSA Group.

The company says the price increase will occur, as this increase in demand is not balanced by an equivalent projection of growth in supply, as ageing mines gradually become depleted.

“Growth in the industry is being driven by the massive new consumer markets in China and to a lesser, but still significant extent, India. The growth in these two economies, in particular, is driving the market higher, and is projected to continue to do so for several years to come. China’s projected gross domestic product growth is averaging about 7% a year and the Indian economy is projected to have increased by more than 7.5% in 2015,” says MSA principal consultant Mike Lynn.

MSA notes the price increase forecast is mirrored in, among others, the Bain reports as well as the McKinsey & Company and the Standard Bank 2014 reports.

“While the industry will continue to experience short-term fluctuations in diamond prices, the long-term fundamentals remain strong,” he says.

Further, amid this prediction, there is also increased diamond exploration.

“Explorers understand that the industry’s long-term fundamentals are good and I believe we are at the beginning of a new and exciting phase of interest in diamond projects,” he notes.

Lynn explains that diamond prices rose dramatically after the global financial crisis until mid-2011, owing to diamond polishers expecting a strong recovery.

This growth was funded by easy credit from banks for diamond dealers. However, the recovery was much slower than expected, which led to an oversupply at the cutting and polishing factories, and a consequent fall in prices from mid-2011.

“Oversupply in the cutting industry means that few buyers of rough diamonds want more stock and they also cannot obtain credit to buy stock. The producers, therefore, have to cut prices to sell their rough diamonds,” explains Lynn.

The correction in prices continued and prices kept falling until the third quarter of 2013, when the cutters and polishers had moved their stock and started to restock with rough diamonds. Prices subsequently recovered, but at a much slower rate than in previous years, as the global economy continued its tentative recovery.

However, according to MSA, the recent drop in diamond prices has not stopped the interest in finding new deposits, as explorers and development consultants to the mining industry are well acquainted with the ebb and flow of interest in different commodities.

Trends and Technological Advances
X-ray Transmission (XRT) recovery technology is a substantial new development in terms of the recovery of diamonds, as it could impact on the costs of recovery, particularly for large stone producers, MSA notes.

Tests conducted by sensor-based sorting machines producer Tomra Sorting Solutions, in South Africa, have shown that a combination of sensor-based sorting technologies – one using colour and near-infrared spectroscopy scanning, and the other a large XRT circuit that can significantly improve diamond recovery – reduce diamond breakage and overall energy consumption.

In the cutting industry, diamond major De Beers recently announced its acquisition of a 33.4% equity in Synova, a Swiss company that manufactures and supplies patent- protected laser microjet technology.