The diamond industry has had a very difficult year in terms of sales and profits. Diamond retailers, wholesalers and polishers have all suffered severely. This has also been a challenging year for diamond mining companies, but it seems that they are still on top of things. Since the beginning of 2009, rough diamond prices have constantly been on the rise (with an increase of 40% since February), while the consumers' price of polished diamonds has gone in the opposite direction. The explanation for this puzzling situation is that while jewelry retailers must keep a decent supply of diamonds and reduce prices in order to increase sales, diamond mining companies can afford the hiatus, and count on the fact that diamond production companies and site holders will remain loyal to them.
De Beers, Rio Tinto and other global diamond mining companies insist on maintaining a decent demand per supply ratio. Therefore, they are reluctant to increase the supply or lower the prices of rough diamonds. Not only have these diamond mining companies limited supply, they have also minimized their mining activities; with 2009 global diamond mining production expected to reach a value of $8 billion, considerably lower than the $13 billion value of 2008.
Diamond polishers object to this strategy and wish that rough diamond prices would at least cease to rise while the market for polished diamonds is still very slow. Lately the world's main diamond mining companies have decided to come together and show consideration for the other members of the diamond supply chain by increasing the output of rough diamonds, which will probably lead to the reduction of diamond prices. It seems that diamond mining companies have finally understood that if they don't take these steps, the entire diamond market will find it incredibly difficult to get back on its feet.
De Beers, Rio Tinto, Alrosa Co. and BHP Billiton, which together control 90% of global diamond production, have all agreed to increase rough diamond output after a long period of having blocked supply pipes. In several recent press conferences, the general explanation for this change was that diamond mining companies want to prevent the collapse of the diamond industry. The balance between the fear of having rough diamond prices decrease and having diamond polishing companies bankrupt will continue to exist, but at this point diamond mining companies have decided to focus more attention on the latter risk.
Undoubtedly, the change won't be drastic and all four companies are expected to keep a large quantity of unpolished diamonds for themselves, but the fact that the general strategy has changed is very important news for the diamond industry. How soon the diamond industry will fully recover from the current recession is a question that even diamond miners can't answer. Demand for diamonds in the US is slowly increasing, but it is no longer regarded as a stable market. As a result, diamond companies have already begun looking for more reliable alternatives in China and India. Another problem is the link between diamond mining and environmental damage, as well as "blood diamonds". Although the diamond industry has taken many measures to minimize environmental damage and regulate the diamond trade,
diamonds are still associated with some questionable phenomena. For the time being, diamond mining companies are doing their best to provide diamond polishing companies with a new spark of optimism.
