TORONTO (miningweekly.com) – As the global diamond industry sobers from a hangover of expected market growth that did not happen, Canadian producers are perhaps best positioned to weather the downturn, given the superiority of the country’s diamond projects.
Since the global economic downturn of 2009 and up to the middle of last year, the midstream segment of the diamond industry – the cutters, manufactures and wholesalers, mainly in India – overspeculated on future demand by aggressively expanding businesses, despite market indications not supporting investment, independent diamond analyst and consultant Paul Zimnisky told Mining Weekly Online in an interview.
Banks accommodated these aspirations by providing the capital. The upstream industry – the miners – happily provided more product at higher prices to meet the midstream’s unsubstantiated demand.
“This incongruence finally caught up to the industry towards the end of last year. There is currently an oversupply of low- to mid-quality polished [diamonds] in the market, and the midstream segment is overleveraged and can no longer substantiate buying rough at the same quantity and price they were before,” Zimnisky explained.
The world’s three largest producers – De Beers, Alrosa and Rio Tinto – had all taken measures in reaction to the situation, by cutting supply, or prices, or a combination of both, which, over time, could eventually normalise conditions, if history was any indication, he said.
Despite current market conditions affecting the industry as a whole, the Canadian operators included, Zimnisky believed Canada was the best-positioned jurisdiction in the industry, given the quality of the projects.
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