De Beers set to produce soaring profits for 2011 after rough diamond sales increase
De Beers diamond prices soar
2.4 k views | Posted October 25, 2011 |
By Aaron Weinman
Despite slowing growth in the US, De Beers’ biggest retail market, emerging markets have fuelled a 35 per cent gain in rough diamond prices.
Increased wealth in some sectors of India and China is enabling consumers to purchase more diamond jewellery. De Beers CEO Philippe Mellier said prices for the company’s rough diamonds increased by 35 per cent in the first half of 2011 and advanced as high as 49 per cent on last year’s figures, only to decline slightly.
“Demand from East Asia has caused a supply shortage, which pushed prices up this year,” Mellier told Bloomberg. “We’re now reaching a new plateau from which prices are going to oscillate.”
De Beers was among producers caught on the back foot after idling mines as the global financial crisis decimated gem sales.
According to Mellier, sales in the US are beginning to recover, defying the expectations of continued decline.
“All the numbers we are receiving from our partners in the US are telling us that sales are up, not hugely up, but up,” Mellier said. “Retail demand in India and China is also very strong.”
Des Kilalea, London-based analyst at RBC Capital Markets, said De Beers should post record or near-record sales in 2011. Kilalea believes sales at De Beers trading arm will be about USD$6.4 billion ($6.1 billion) for 2011.
Mellier added that retail continues to strengthen when referring to global sales, pinpointing demand from Asian markets.
“De Beers expects a pretty good start next year because there is strong demand from Asian customers.”
The CEO suspects that De Beers will produce between 33 and 35 million carats this year, compared with 33 million carats from 2010.
“It’s going to take some time for the industry to reach the production level of 2008, the last big production year before the crisis,” he added. “It may take two to five years.”
The news of De Beers surge in sales comes after the company just last month, agreed to shift its diamond sorting and trading operations to Botswana by the end of 2013. This decision ends the previous arrangement where all sales took place in London since 1888.
De Beers is 45 per cent held by Anglo American Plc, 40 per cent by South Africa’s Oppenheimer family and 15 per cent owned by the Botswana government.
Mellier, a former Alstom SA executive was appointed De Beers CEO in May this year, marking a break in tradition as the South African company previously promoted from within its own ranks.
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