Diamonds set to regain their polish: Citigroup
Patience should pay off for investors in diamonds, according to
Citigroup, as prices start to pick up from 2015 when lower production
and growing demand from China kicks in.
Diamond prices are still lower than two years ago, with demand not strong enough yet for the limited mine supply to create a significant shortage, but the structural demand shift in China and a slowly recovering global economy will change that believes the US broker.
Citi says that diamond discoveries tend to come in batches with the last crop of finds (in Canada) now ageing or worked out and new ones not compensating for the drop-off in production.
Global output peaked at 175mln carats in 2006, but is now below 130mln carats per year.
Even if new discoveries take that figure back up to 160mln again by 2018, a normalisation of the global economy should see demand far exceed that argues the broker.
Interest in diamonds as a commodity has picked up recently because of recent Russian corporate activity, such as the sale of a 14% stake in state-owned miner Alrosa.
In China, the growth of the middle class allied to increased consumerism has seen sales of diamond rings soar among engaged couples adds the broker.
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