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Lower demand hits prices.

CERTIFIED POLISHED DIAMOND PRICES FELL 12.5% over the course of 2012, according to the Rapaport Group. Meanwhile rough diamond prices fell 16%, according to International Diamond Consultants Ltd.

The market grew by a modest 3-4% over the course of last year.

Botswana, it is estimated, may have only 20 years of diamond production left--a daunting thought given that revenues from the sector account for most of government income and export earnings. Diamond revenues have helped the country grow its GDP per capita from $70 upon independence in 1966 to $7,470 in 2011.

In July, De Beers announced first half figures showing total sales decreased 14% to $3.3bn. Earnings were half that of the same period of 2011 but 16% ahead of the second half of 2011. Lower demand, especially from India, hampered profits but the US and China proved resilient markets. Prices remained steady. Growth is expected to come from the later regions, as well as the Gulf and japan, whilst Europe and India continue to lag.

De Beers production for the whole of 2012 fell around 16% to 27m carats, the lowest since 2009 when it cut production 50% to maintain prices in the wake of the Western financial crisis.

The outlook for the sector is one of modest growth, given the prevailing state of the global economy, which should equal or exceed last year's. Long term the trend for prices will be positive, according to De Beers, who say that demand will continue to outstrip supply.

Bain & Co concur, saying that a growing middle class in India and China will mean the rate of growth in demand for diamonds will be double the rate of growth in supply, between now and 2020. China and India's share of demand will grow from 20% to 28% by 2016.
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Title Annotation:Diamonds
Publication:African Business
Article Type:Brief article
Geographic Code:60AFR
Date:Feb 1, 2013
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