Gem production to fall further

SOUTH Africa’s diamond production will continue declining up to at least 2011, consultancy Frost & Sullivan said yesterday.

‘This is 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,’ said the consultancy’s metals & mining analyst Wonder Nyanjowa in a statement.
Frost & Sullivan forecast that South Africa’s diamond production would decline from the 15,8 million carats produced in 2008 to levels of 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 Nyanjowa.
‘The decline in the global demand for diamonds has been unprecedented, resulting in most diamond mines curtailing production, reducing costs or closing altogether.’
Nyanjowa said 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 US market, which accounted for around 50 per cent 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.
‘With declining disposable incomes, consumers in key diamond markets such as the US, China and India have reduced expenditures on luxury goods,’ Nyanjowa said.
Liquidity constraints had also forced jewellery manufacturers to buy fewer rough diamonds.
The Royal Bank of Canada Capital Markets maintained that De Beers’ rough diamond sales of only US$250 million between January and February 2009 was the worst performance of the company in 25 years, Nyanjowa said.
‘De Beers, which is the world’s largest diamond producer, has officially announced a 40 percent diamond production cut from all its operations in South Africa, Botswana, Namibia and Canada.’
This had 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.
In South Africa, De Beers Consolidated Mines account for around 90 per cent of the country’s new mine supply of rough diamonds.
Its mines have been operating below full capacity since the second half of 2008, Nyanjowa said. -Nampa-Sapa