Bain & Company questions if diamonds are forever
Diamonds are forever is a well-known saying. Yet a new study from Bain & Company in cooperation with the Antwerp World Diamond Centre (AWDC) shows that diamonds may well not be around forever. The current amount of reserves is being rapidly depleted and in fact – if no new reserves or better mining techniques are developed – in a number of decades diamonds will become far scarcer than they currently are.
The supply of rough diamonds is concentrated in a handful of regions, with 70% of reserves in Africa and Russia. In 2000, the total supply equaled just over 2,500 millions of carats. Twelve years later, the supply has dropped by circa 10% to just over 2,300 millions of carats.
Over the next 10-year period, Bain expects the demand for diamonds to outgrow supply by a compound annual rate of 3.1%*. The calculations of the consultants do not go further than 2023, yet its findings are clear: diamonds, which already are highly scarce, will get even scarcer. For players in the value chain this is good news, as higher prices mean higher margins. Yet for consumers the trend implies that diamonds may belong even more just to the rich and elite.
Not just gloomy
The picture though may not be as gloomy as Bain’s analysis reveals. The consulting firm’s analysis is based on the current known diamond base, defined as diamonds that can be extracted in an economically feasible manner. Similar to the case of shale gas, new mining techniques may boost mining efficiency and hence in the future turn currently unfeasible mines into feasible ones. For example, recently a new technique introduced in a mine in Botswana (Debswana’s Jwaneng diamond mine) increased output of the same mine by nearly 10%.
In addition, in particular in Africa, large areas that potentially hold diamonds still remain unexplored. Although the last major diamond mine on the globe was discovered 15 years ago in Zimbabwe, experts believe that over the coming years there undoubtedly will be new hidden jewels that will be unveiled.
* The supply of diamonds is expected to grow at 2.0%. The demand for diamonds will grow by 5.1%, mainly the result of growing wealth in China and India.
