Diamond Q4 2014 - Q1 2015 | KPMG | GLOBAL

Diamond Q4 2014 - Q1 2015

Diamond Q4 2014 - Q1 2015

Rough diamond prices dropped about 3 percent in 2014, from US$230/carat in 2013, to reach US$224/carat in 2014, driven by the tightening of credit by banks to the diamond industry.


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KPMG in Botswana


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Price Outlook

This led to the release of inventories by traders, cutters and polishers, resulting in higher supply. According to the data from www International Diamond Consultants – a UK-based firm – rough diamond prices dropped by about 7 percent in Q4, 2014, which is considered to be the steepest drop since Q2, 2012. In addition to this, the closure of the Antwerp Diamond Bank in October 2014 – which financed trading companies in the Belgian port city for the past 80 years – resulted in liquidity concerns in the diamond industry.

Other factors, such as sluggish Chinese economy, pressures from deflation in Japan and the EU, and several geopolitical conditions resulted in downward pressures on rough diamond prices. In 2015, rough diamond prices are likely to increase about 1 percent, to reach US$227/carat, on account of stable supply in 2015.

This is likely to improve gradually on account of increasing middle class demand from China and India. In Q1, 2015, prices remained unchanged due to the restricted credit issues and the continued strengthening of the US dollar - which made diamonds costlier for buyers across Japan, the EU and Russia – resulting in lowering its demand, globally.1 Average price of polished diamonds increased 3.6 percent in 2014, from US$140/carat in 2013 to reach US$145/carat.

However, according to the Rappaport report, diamond trading declined during October 2014, with the Jewish holidays and Diwali festival in India – which relates to the close of trading houses – backed by the weakening global demand for diamonds. In Q4, 2014, the release of 0.30-carat to 0.50-carat diamonds by the Gemological Institute of America (GIA) laboratories added to the supply glut. Further, demand from China declined due to the large inventories of 0.30 carat diamonds, which were aggressively bought in 2013. In 2015, average polished diamond prices are expected to decline by 8 percent as compared with 2014, to reach US$134/carat in 2015. In Q1, 2015, oversupply due to high inventory levels across the distribution channel, accounted for the reduced prices by suppliers, to generate higher profits and cash.


1 “Rough Diamond Prices Drop as Bank Withdrawal Produces Jewel Glut”, Bloomberg Business, 8 January 2015, accessed May 2015; “Global Rough Diamond Production Estimated to Hit Over 135M Carats in 2015”, Paul Zimnisky, 6 February 2015, accessed May 2015.

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