06 Jul 2016

The divorce between the UK and European Union, called Brexit, would not have an impact on diamond market.

Head of Operations at Diamond Trading Company Botswana (DTCB) Mr Joseph Ikotlhaeng said major market for Botswana diamonds are Unitsed States of America, Japan, India and China.

Mr Ikotlhaeng said the USA represents 40 per cent of the world market while Belgium is the only important European market.

DTCB operations were relocated to Gaborone in 2008, and the opening of De Beers Global Sightholder Sales (DBGSS) in the country has seen the diamond pipeline activities done in Botswana.

Although the diamond demand has slowed, Mr Ikotlhaeng said the prices remained favourable.

De Beers also said the UK represents only a very small share of global diamond jewellery demand, so the direct impact of Brexit is likely to be relatively insignificant.

Responding to BOPA questionnaire, De Beers’ head of media relations Ms Lynette Gould said the European Union (including UK) actually makes up seven per cent of global diamond jewellery demand.

She said demand from consumers in the US – the largest and most mature market for consumer sales of diamond jewellery – hit a new record high of US$39bn in 2015.

“Future growth in demand is expected to continue at a healthy pace, driven primarily by the economic recovery in the USA and the strength of growth of middle classes in China and India,” Mrs Gould said.

She said diamond supply can be expected to decline gradually from 2020 when many of the existing mines would begin to see declining outputs unless major discoveries are made in the coming years.

“Positive demand growth for diamonds will therefore almost certainly outstrip the growth in carat production,” she said.

 Meanwhile, a press release from The Rapaport Group states that the British exit would not have a sustainable negative impact on polished diamond demand.

It is said the EU has not been a dominant diamond consumption centre for many years.

“While a negative wealth effect due to declining currencies and equity markets will reduce EU and British commercial demand, global investment demand for higher quality diamonds as a store of value will increase due to global economic and political uncertainty,” it is said.

Rapaport states that Chinese and Indian diamond demand was not likely to decline due to Brexit and was sustainable at current low levels.

Commenting on the US market, it said it would remain healthy and retains growth adding they do not expect any significant medium to long term negative impact on the US diamond market.

 “While demand may benefit as a stronger dollar increases purchasing power, a short term decline in equity prices and wealth may reduce demand during the quiet summer months. Overall we expect a positive US holiday season this December” it is said.

The negative impact, according to Rapaport, might be the pressure from banks as liquidity is expected to be reduced.

“While Brexit is not expected to significantly reduce overall polished demand it will indirectly impact trade liquidity resulting in price volatility,” it is said.

Rapaport said it was vital that rough diamond producers maintain price levels that ensure profitability and liquidity in the manufacturing sector during these uncertain times.

“Furthermore, producers must increase their marketing spend to ensure generic diamond engagement ring demand from US millennial consumers,” Rapaport said.

Fifty-two per cent of the British voted through a referendum to opt out of a 28 member union and this has resulted with damaging consequences in the economy leading to the plummeting of the pound and crashing of markets. ENDS