Can Miners Buck the Diamond Price Trend 2015?

Lack of transparency is a key issue in the diamond industry. It can be tough for investors to get accurate, up-to-date price information on the gems, and as a result, it can be difficult for them to make important investment decisions. 
However, one diamond price trend 2015 that’s become clear is that the diamond market isn’t doing well. Indeed, Paul Zimnisky Diamond Analytics’ Zimnisky Global Rough Diamond Price index, a tool aimed at dispelling some of the opacity in the diamond space, shows that in the last year, rough diamond prices have sunk 11.78 percent.
Most of the carnage took place in the second half of 2015. As the chart below shows, diamond prices, which had remained fairly steady up until then, took a steep dive at that time, and as yet have not recovered.

Image courtesy of Paul Zimnisky Diamond Analytics.

Those figures line up with stats from Rapaport, a leading source of diamond price information. According to that organization, as of September, top-quality, 1-carat stones had seen their value fall by about 13 percent in the last year. Meanwhile, Bloomberg places the overall 2015 price slump for rough diamonds at 15 percent.
With that information in mind, it’s interesting to look at what’s been weighing on diamond prices, plus what the future may hold for the gems. All in all, it looks like major players in the diamond market believe a turnaround may be possible by the end of 2015.

Diamond price trend 2015: The China factor

In 2015, one issue has been cited again and again as having a negative impact on diamond prices and the diamond industry as a whole: China.
According to a recent Financial Times article, diamond prices have declined as sellers struggle to sell their inventory, with China in particular being a problem. The news outlet states that some dealers and polishers were left out to dry this year after an “unexpectedly sharp slowdown in new store openings on the Chinese mainland.”
On a different note, Bloomberg points to “an economic slowdown, stock market turmoil, and an anti-corruption campaign that’s stifled purchasing of luxury goods” as other China-related factors that have impacted diamond prices this year. Stock market turmoil is perhaps most worth noting — China has been plagued by stock market issues in recent months, with August’s yuan devaluation and Black Monday selloff causing major unrest.
But why is what’s happening in China having such a big impact on the diamond price trend 2015? Put simply, the Asian nation is a key contributor to global diamond demand. Indeed, according to Bloomberg, it accounts for about 13 percent of the $85-billion-a-year global market.
And, as Alan Davies, head of Rio Tinto’s (ASX:RIO,LSE:RIO,NYSE:RIO) diamonds & minerals unit, told the Financial Times, “China has become such a big part of the industry. A small change in demand there has a bigger effect than at any point in the past.”

Diamond price trend 2015: What’s next?

Major miners like Rio Tinto and De Beers have definitely been hurt by the current low diamond price environment (as have many diamond cutters and polishers), but they and other key industry players seem certain that the situation is fixable.
For instance, Davies has pointed to increasing worldwide diamond demand growth as positive, noting that while demand out of India and China has fallen 6 percent in 2015, overall worldwide diamond demand is up 2 percent. “Without much new supply and without any demographic changes from here, the market conditions are in place for a favourable long-term outlook,” he told the Financial Times.
More recently, he said to Bloomberg that he expects to see excess stockpiles “burn[ed] off” in the next 12 to 18 months. His company plans to help speed that along by “paus[ing] final product processing in the fourth quarter at Argyle.”
Meanwhile, Stephen Lussier, executive vice president of De Beers, has said that his company is still hopeful that Chinese demand will rise. “We’ll push behind the big occasions, weddings and anniversaries, which are becoming an increasingly important occasion for gift-giving in China. We see the gift market as more important and interesting than self-purchasing,” he’s quoted as saying in another Bloomberg article.
That said, like Davies, he admitted that a recovery in the diamond market may take some time. “The challenge in China is that we all got used to growing at exorbitant rates … The industry is having to re-adjust itself,” he said to Business Standard.
On the more optimistic side, ALROSA (MCX:ALNU) CEO Andrey Zharkov told Rapaport this month that his company sees rough diamond prices stabilizing by the end of 2015.
All in all, it seems that the diamond market’s major members remain optimistic about the diamond price trend 2015. The general line of thinking appears to be that while the last few months of the year may not bring substantially higher prices, they will at least bring stability. Investors will no doubt be watching China closely to see if demand from the Asian nation once again begins to prop up diamond prices.

 
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.