Production of diamonds
such as this are
expected to keep
declining till 2011
 
Cape Town, South Africa — MININGREVIEW.COM — 26 May 2009 – South Africa’s diamond production will continue declining up to at least 2011 amid signs that the global economic recovery will be protracted with no sharp rebounds expected in the demand for commodities in the near to medium term.

Taking this stand in a statement issued here, growth partnership company Frost & Sullivan forecast that the country’s diamond production would decline from the 15.8 million carats produced in 2008 to levels around 12 million carats in 2011.

“Although the global demand for all commodities has slumped significantly since the onset of the global economic slowdown, it is perhaps the diamond mining sector in Southern Africa that has been hardest hit,” said Frost & Sullivan metals & mining analyst Wonder Nyanjowa. “The decline in the global demand for diamonds has been unprecedented, resulting in most diamond mines curtailing production, reducing costs or closing altogether.”

He added that the global luxury goods market was highly vulnerable to global economic cycles and changes to household wealth in certain countries or regions of the world. The United States market – which accounted for approximately 50% of the global demand for diamonds – remained subdued without any major signs of a rebound in diamond jewellery sales in the first quarter of 2009, according to Nyanjova.

“With declining disposable incomes, consumers in key diamond markets such the United States, China and India have reduced expenditure on luxury goods,” he explained. “Liquidity constraints have also forced jewellery manufacturers to buy fewer rough diamonds.”

The Royal Bank of Canada Capital Markets maintains that DeBeers’ rough diamond sales of only US$250 million (R2.25 billion) between January and February 2009 is the worst performance by the company in 25 years.

“DeBeers – which is the world’s largest diamond producer – has officially announced a 40% diamond production cut from all its operations in South Africa, Botswana, Namibia and Canada,” Nyanjowa notes. “This has been done to secure the future of the company, as well as to position itself for a rebound in the global demand for diamonds in future.”