In a recently released report, Frost & Sullivan has estimated that the global supply of mined roughs will fall to 14 million carats while the global roughs demand will rise to 292 million carats by 2050, leading to a humongous 278 million carats Demand-Supply gap.
Since its peak of 176.7 million carats in 2006, global annual production has fallen by ~26% to 131 million carats in 2013. Since past 2 decades witnessed more diamond production than in the rest of history, diamond mines exhausted their resources faster. All major diamond mines that produce 5+ million carats have crossed their peak production levels and some mines like Argyle and Diavik are looking to reach the end of life within a decade itself.
Even though, for some mines, life may be extended by converting into underground mining, it is a highly expensive and less viable option. Till date more than 8,000 kimberlites have been discovered but only 67 of them were economically viable. Diamond miners have realized this and major producers have already reduced their exploration budgets. Overall global diamond exploration budget has nose-dived to around 50% of its 2007-08 levels.
Bain had predicted that mined diamond production will start declining by 2019 itself, dipping by 1.9% p.a.
However, at the same time, the demand for diamond roughs is estimated to grow gradually to 292 million carats, fuelled by robust jewelry growth in China and India. This will lead to a demand-supply gap of 278 million carats, with shortfall rising to 41 million carats by 2022 itself.
In 2014, prices of diamonds rose by around 7% and are expected to either way rise by 5-7% p.a. for next few years, as per BMO Capital Markets report. But, the predicted supply-demand shortfall will further increase diamond prices. Frost & Sullivan’s report also details that Lab-grown diamonds’ production is expected to surge and how they can help address some of this shortfall.