Rough diamond production to rise after Covid-19 disruptions cleared

Data and analytics company GlobalData expects global rough diamond production to grow by 1.4% this year to reach 112.99-million carats.

This follows the estimated 19.4% contraction in output to 111.4-million carats in 2020 as a result of disruptions brought about by the Covid-19 pandemic.

GlobalData notes that significant recoveries in output are expected in Botswana, at 37%; Canada, at 16.6%; and Angola, at 26.3%.

GlobalData associate project manager Vinneth Bajaj says global output will only marginally increase owing to the closure of the Argyle mine, in Australia, in November 2020, alongside only moderate production growth in Russia.

“Overall, production over the forecast period [from 2021 to 2025] is expected to grow at a compound annual growth rate [(CAGR)] of 2.5% to 124.8-million carats in 2025.”

In 2020, the pandemic negatively impacted on the global diamond market, which was already struggling as a result of several factors, such as the then ongoing US-China trade war and the political instability in Hong Kong – one of the major locations for trading diamonds.

As a result of the pandemic, operating activities and cross-border movement were severely disrupted.

“During the first quarter of 2020, China was the worst affected; however, it was also the fastest to recover after the setback from the pandemic,” he says.

As a result, China went on to become a key driver for the balanced global demand for diamonds.

Elsewhere, Bajaj reports that the gradual easing of restrictions improved market conditions and reinforced demand across the global supply chain, with demand in key consuming markets, including the US and China, recovering towards the end of 2020.

Meanwhile, production in Botswana was affected the most by the pandemic, reporting a significant 28.5% fall to 16.9-million carats in 2020, primarily as a result of the continued planned reductions in response to the lower demand for rough diamonds caused by Covid-19 and operational challenges at Debswana’s Orapa mine.

OUTLOOK

Looking ahead, Bajaj says that, owing to mines returning to operations and signs of recovery in demand, Botswana’s production of rough diamonds is expected to bounce back, rising by 37%, to reach 23.2-million carats this year.

However, Bajaj also foresees a decline in output of 2.2% in 2022, linked to the planned closure of the Damtshaa mine, and then relatively flat output over the rest of the forecast period to 2025.

Botswana’s largest producer – Debswana – anticipates production recovering to pre-Covid-19 levels between this year and 2023.

Meanwhile, Russia, which holds some of the world’s largest diamond deposits, is expected to remain the world’s largest supplier of rough diamonds, reports GlobalData.

With potential new diamond mines, Botswana, Canada and the Democratic Republic of Congo (DRC) are also expected to remain prominent suppliers of rough diamonds to global market in the years to come.

Further, GlobalData suggests that Angola will emerge among the top five producers globally, and eventually surpass the DRC to become the fourth largest producer towards the latter part of the forecast period.

“Production in Australia will continue to decline, owing to the depleting ore reserves at the Argyle mine, which commenced in 1983 and then ceased production in November 2020. Given that the Ellendale mine is currently idled, Australia’s diamond production effectively ceased at the end of 2020,” Bajaj notes.

However, he says the Australian diamond industry may be revived as a result of the emergence of several mining companies currently conducting various exploration activities to nurture potential diamond deposits.

In addition, he points out that, as of May 24, Lucapa Diamonds entered into a binding agreement to acquire the Merlin mine from Merlin Diamonds, “offering some hope of restarting the Australian diamond industry after the closure of Argyle”.

Additionally, to attract investments in diamond mining, Bajaj says the Northern Territory government also reduced the diamonds royalty rate to 5% in July 2020 – a 2.5% reduction compared with the previous rate of 7.5%.