The diamond industry’s collapse last year left the biggest producers with billions of dollars of uncut gems stashed away in safes. Now, in a matter of months, they have suddenly found buyers.
The huge stockpile was built up when the diamond world came to a standstill during the height of the pandemic, stoking fears that gems amassed by the biggest miners could hurt the sector for years. But rampant demand from the middlemen who cut, polish and trade stones has all but wiped out the stash – and remarkably as top producers De Beers and Alrosa raised prices.
It’s been a rapid turnaround as cutting centers in India and Antwerp rushed to replenish supplies they had been unable to buy during the worst of the crisis. At the same time, demand jumped amid surprisingly good festive sales, with consumers unable to book vacations spending more on luxuries such as gems.
De Beers this week said it sold 13.5 million carats of diamonds in the first quarter, almost double the amount it mined in the period, signaling stock drawdowns. While the No. 1 miner doesn’t report inventories, it indicated to customers in recent weeks that stockpiles have returned to normal levels, according to sources. The company declined to comment.
Russian miner Alrosa’s inventories tumbled about 60 per cent in six months to 12.8 million carats by the end of March, the lowest in almost three years.
Managing supply has been a headache for the sector ever since De Beers ended its monopoly around the turn of the century. Inventories ballooned during the 2008-09 financial crisis and again in 2013, and each time subsequent stockpile sales saw polished gems build up, putting huge pressure on the industry’s midstream.
Yet the top miners have been able to raise prices this time round, after significantly cutting production last year and buoyed by renewed demand from manufacturers and traders. De Beers has been hiking prices since the end of last year, back to pre-coronavirus levels. It sold more than $1.6 billion in rough gems in its first three sales of 2021, the most since 2018.
“Alrosa and De Beers have managed to clear the excess inventories built over the course of 2020 and without hurting polished-diamond pricing that continues to advance,” Liberum Capital analyst Ben Davis said. “This bodes very well for the remainder of the year to clear that much stock in such a short space of time.”
There are still plenty of risks. The start of the year is typically busiest because of restocking, and any slowing in sales will pressure prices again.
In India, the industry’s factory engine room remains vulnerable to a ferocious new coronavirus wave. Concerns are mounting that local production won’t be able to meet demand from key Chinese and US retailers, and some manufacturing has already been curtailed, according to sources. That could create shortages, but may also cut rough-diamond demand.
While the speed of the stockpile drawdown caught many by surprise, the big question is whether the industry will be disciplined enough not to sell too much too soon.
“The industry has to use supply and pricing in tandem,” said Anish Aggarwal, a partner at adviser Gemdax. “That’s been the big takeaway from this crisis.”
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Directors: Min Geun, Oh Yoon-Dong
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Zayed Sustainability Prize
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
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Send “thenational” to the following numbers or call the hotline on: 0502955999
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Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
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- 20,000 new jobs for Emiratis over three years
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Killing of Qassem Suleimani
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Al Jazira's foreign quartet for 2017/18
Romarinho, Brazil
Lassana Diarra, France
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Abu Dhabi card
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Indoor cricket in a nutshell
Indoor Cricket World Cup - Sep 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
SPECS
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Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
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Sholto Byrnes on Myanmar politics
UAE currency: the story behind the money in your pockets