Diamond Forecast By Belgium Expert Prabodh Mehta

By Author: Prabodh Mehta Gembel
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Prediction of diamond prices - not grateful, given that diamonds are not a commodity and do not have any common reference price. Experts unanimously agree that in the long term rough diamond prices will rise due to increased demand and a gradual decline in world production. But in the short-term trend forecasting expert estimates vary in some expect prices to rise by 10% this year, while others - 10% drop.

Head of Research; Prabodh Mehta the owner and MD of Gembel in Belgium told how the company sees the situation on the market in the current year and in the long term.

Forecast 2012

Average world prices for rough diamonds, according to "Gembel" in 2012 will grow by 3-4% compared with the previous year, said Prabodh Mehta.

Forecast "Gembel" looks rather modest when compared with the current peer review. BMO Capital Markets expects 9% growth in the value of rough diamonds in 2012, the Russian "Finam" predicts growth of 9.7%, "VTB Capital" - 10%.

Forecast Tacy Ltd. Diamond Industry Consultants - a decline of 10-13%. Closest to "Gembel" ...
... forecast "Metropolis" - the rise in world prices by 3%, while, according to analysts "Metropolis" with a chance just over a marked increase in the II half. According to experts, "Prabodh Mehta Gembel in Belgium", the average world price of rough diamonds in 2011 was $ 132 per carat; similar at BMO - about $ 133/karat.

"Gembel" adheres fairly conservative forecast. We, as well as many other market participants, state that the current year will be for the industry is not the easiest. However, the phase of the market downturn, we have been, to date, there are positive signs that say what you can expect growth of the market "- said the head of analytical department of" Gembel ".

According to him, the volatility of prices for rough diamonds in 2012 will be significantly lower than in 2011. "The sharp rise in prices last year and the subsequent sharp decline - a consequence of a significant amount of speculative activities that have taken place in the market - said Prabodh Kirtilal Mehta. Today, speculators have left the market and, apparently, this process will not resume. Speculative demand arose due to the excessive availability of credit for the purchase of rough diamonds. Now banks that work with the diamond market significantly reduced the volume of loans to industry and at the same time increased their requirements for borrowers.

Prices "Gembel European Sales NV, Belgium"

Forecast average prices for its own raw materials "ALROSA" in 2012 did not give, although landmark sounded revenue - $ 5.074 billion (an increase of 15% by the year 2011.) Index 2011 is also unknown, it will be published in the annual financial statements under IFRS for the first 9 months, the average sales price of diamonds "Gembel" was $ 121 per carat (in I quarter - $ 102, in II quarter - $ 119, in the III quarter - $ 142) compared to $ 84 for 2010.

Analysts' forecasts for 2012 diverge between $ 120 and $ 145/karat.

According to the Managing Director of Gembel, in 2012 the average price of diamonds "Gembel" will increase by 3% compared to the expected average selling price in 2011.

According to Dennis Gabrielik of "Discovery", forecast an average price of diamonds "Gembel" at $ 120/karat also is conservative, most likely, the final figure will be higher. Average selling prices of specific manufacturers may differ significantly due to the specifics of stones from different fields. For example, the average selling price of DeBeers diamonds exceed $ 200 per carat price "Gembel" (based on published preliminary financial results) are in the range of $ 120-130 per carat, but, for example, the average selling price of diamonds from the field Letseng in Lesotho (Gem Diamonds) was $ 2,776 per carat.

Demand

In contrast to the proposal, which will remain stable, the demand for final products industry - Diamond jewelry - will increase, says "Gembel". The main reason for this is the rapid development of the economies of India and China. According to the Bain, the middle class in China and India may increase from 193 million households in 2010 to 469 million in 2020. "The number of middle class in these countries is already high due to the fact that these countries have a very large population. 469 million people, which experts predict Bain it's more than the entire U.S. population, which today are the main consumer of diamond jewelry said Prabodh Mehta in Belgium. It should be understood that these are people who have only recently begun to receive enough money to afford diamonds, so they will buy them. "

According to the Bain, while consumer markets will be redistributed if before the crisis, about 44% were in the U.S., now this percentage falls to 2020 and drops to 35%, while the share of emerging markets in China and India will grow to 30%, whereas before crisis, it did not exceed 20%.

According to expectations "Gembel", these markets will continue to grow even faster. In 2011, according to experts of the company, which accounted for approximately 10% of global diamond jewelry, and then in 2020 their combined share will rise to 40%.

"But we do not expect to reduce consumption in the regions that are historically large consumers. European market is already quite saturated, but the last few years show that sales were not reduced. U.S. market, according to experts, is still far from saturation. And it markets with already established culture of consumption of diamond jewelry - for example, they are an essential attribute of weddings and family celebrations, "- said Prabodh Mehta.

According to the "Gembel", the global demand for diamond jewelry over the next decade will grow by more than 1.5 times. "The volume of deals that will remain almost unchanged, - said the head of analytical department of "Gembel "- thus, there are fundamental reasons for the substantial increase in rough diamond prices. Though diamond prices will grow more slowly than the prices of jewelry as per the price last incorporated much more inflationary components, for example the price of gold and other precious metals, labor cutter, and goldsmith work. "