World's most valuable blue diamond

Working to promote their own diamond products made from the highest quality raw materials

The fact that prices for rough diamonds will increase in the short term will not be doubted by almost all professional participants of the diamond market. However, no one dares to give an accurate forecast - how the price will grow depending on the quality of the raw materials. Analysts and representatives of large companies prefer to limit themselves to general formulations, like recently expressed by representatives of Rio Tinto that "between 2008 and 2016, the demand for diamonds will significantly exceed the supply." Meanwhile, the polished diamond market in the second quarter of 2008 has already shown a curious trend: the prices for large diamonds with high characteristics increased sharply (from 10% to 15% for stones of excellent grade with weight from 1 to 3 carats and above), and small diamonds remained Practically unchanged. Looks like,

There are at least three serious factors suggesting that in the foreseeable future it will be possible to observe an exponential increase in prices - but only for large-scale high-quality raw materials, but the fate of the "Indian product" seems unenviable. Among such factors are the following:

- The processes of vertical integration in the industry continue to develop, practically all major producers of raw materials: De Beers, ALROSA, Rio Tinto, Harry Winston Diamond Corporation (formerly Aber Diamond Corporation), Leviev Group are working to promote their own diamond products made from the highest quality raw materials controlled They deposits, so the supply of this raw material on the market decreases;

- the share of small-sized low-quality raw materials in the section of current extraction of the main indigenous deposits increases;

- Dealers working with the "Indian goods" created a huge speculative bubble - an uncontrolled runoff, roughly equal to the world's annual production of raw materials of this class. Lobbyist efforts of dealers allowed to get bank loans for these diamonds, and money went to branches that are more attractive than lapidary. Analysts of financial markets give a rather negative forecast for the development of leading US banks for the second half of 2008 - their shares are falling rapidly against the backdrop of soaring oil prices and depressing information from the US labor market. Of course, this process can not but affect the banks of India and South-East Asia, forced like their American counterparts to get rid of "bad" loans and unreliable assets. Therefore, the probability that in the autumn the diamond pledge will be thrown out on the market and the prices for "

Against this background, events in the Russian diamond market are very noteworthy. ALROSA is in no hurry to hold a traditional auction for diamonds weighing more than 10.8 carats, obviously waiting for the moment when prices reach another historic high. And on May 26, 2008, Russian President Dmitry Medvedev signed Decree No. 848 "On Amendments to the Regulations on the Diamond Fund of the Russian Federation ...". Changes are made only in two sub-items, but their meaning significantly changes the practice of trade in rough diamonds in Russia and reflects the main trend of the global diamond market for a sharp rise in price of high-quality raw materials.

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De Beers, which usually could maintain high prices for diamonds, limiting their supply

After more than two decades, diamond prices have experienced unceasing growth amid strong demand, the global diamond business is now experiencing difficulties along with other luxury industries, the International Herald Tribune reported . However, the diamond industry is different from other industries that produce goods from the luxury category, in that it depends on a single product. And this product is no longer under the control of the company De Beers, which usually could maintain high prices for diamonds, limiting their supply.

Hopes that the richer India and China will be able to fill the fall in demand were crossed out as soon as the recession reached Asia, causing the prices for diamonds to slide down by about 30% compared to their peak last August.

De Beers, in which mining giant Anglo American owns 45 percent of the shares, itself controls about 40% of the diamond market. In January of this year, De Beers said that by April it will cut production of rough diamonds by almost 50%.

The De Beers division recently placed on the shelf a deal to acquire a half stake in the Russian diamond mining company due to the financial crisis; Another daughter, De Beers, recently terminated a production agreement at a mine in South Africa.

Difficulties experienced by other diamond producers. ALROSA, the Russian state-owned company that produces diamonds, sharply declined in December last year due to falling demand.

However, the seeds of the current turmoil in the diamond industry were sown before the economic crisis, due to the fact that the producers of these precious stones accumulated large stocks of them and climbed into excessive debts.

The immediate outlook for the industry may look bleak, but some analysts argue that once the excessive amount of diamonds produced passes through the system, prices will recover. If new deposits of diamonds are not discovered, Tacy expert Haim Even-Zohar believes, the newly mined diamonds in the world will end in 20 years.

As soon as demand is restored, any shortage of diamonds will force prices to move up and force them to resume mining of these stones. "The long-term prospects look good," Haim Even-Zohar points out. "However, in the near future, countries and their people will experience difficult times."

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Although representatives from the Kimberley Process have not been to Zimbabwe

A Kimberley Process group recently visited Zimbabwe for inspection purposes, seeking, inter alia, to determine whether there had been massacres in Marange during a raid last year by security forces on participants in illegal diamond mining.

Although representatives from the Kimberley Process have not been to Zimbabwe for the first time to investigate the circumstances of this diamond battles, the most recent visit was followed by a concerted effort by some non-governmental organizations such as Partnership Africa Canada (PAC) to halt the participation of this South African Country in the Kimberley Process, an organization created to stop the flow of conflict diamonds - raw diamonds used by the rebel movements for the financial nancing wars against legitimate governments.

It seems that the call to suspend Zimbabwe's participation in the Kimberley Process is caused not by the flourishing illegal mining of diamonds and the smuggling of precious stones by the glitzers into countries such as South Africa, after which they are sold as legal stones.

"The government of Zimbabwe, which is not alien to violence, killed dozens of miners engaged in artisanal crafts in alluvial deposits of diamonds, in order to clear these areas of the country from them. There was no response to urgent requests for action by non-governmental organizations and industry observers in the Kimberley Process, supported by several governments and the European Union. In November 2008, the Zimbabwe Armed Forces used force to purge the Chiadzwa deposit (in Marange) from diamond miners. The media reported that more than 50 people were shot and killed, many of them being shot from helicopters. This action was condemned by the organization Zimbabwe Lawyers for Human Rights (Zimbabwe Lawyers for Human Rights) and many others, "PAC said.

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Diamond business is a very serious sector of the economy

The recent decision of the Government of Flanders to support the Belgian diamond industry was already the third similar action on the world market after Russia and Angola. For those subjects of the market in which the diamond business is a very serious sector of the economy and who at one time delegated some of their opportunities to regulate the market to a global monopolist - De Beers, objectively there is no other choice. Even absolutely loyal De Beers countries, such as Botswana, have expressed a desire to increase the cost of their participation in implementing anti-crisis solutions from the national budget through increasing their share in the share capital of the diamond corporation.

State guarantees are a tool to support the industry with a relatively high production cost in the countries of extraction of rough diamonds and to preserve the role of the traditional diamond center of Antwerp. That is, in fact, participants in the market of rough diamonds, located on different sides of the pipeline, came up with similar initiatives in the interests of preserving the market and freeing it from speculative ballast.

How can this affect the prospects for the development of the market?

It is obvious that state guarantees require banks themselves to understand the creditworthiness and stability of their clients' business for a long enough perspective. This, in turn, stimulates non-speculative market participants to secure bank guarantees of their future that are sufficiently firm for banks, and such long-term contracts with extractive companies are such guarantees. No abilities and talents of working on the open market of raw materials are sufficient grounds for the bank's credit committee. The legal obligations of the raw material producer are guaranteed by the potential borrower.

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Main role of gold is the role of the stabilizer of financial markets

It is obvious that, as before, the main role of gold is the role of the stabilizer of financial markets. Gold is to a lesser extent industrial metal, and therefore the price of gold as a result of the crisis has not subsided. It would seem, on the contrary, the price should have risen to the level of $ 1000 / ounce, but a sharp decline in the consumption of jewelry, especially in the large markets of the US and India, which was not compensated by the increased demand in investment markets (in the form of ingots and coins) , Did not allow the price to rise.

The price of gold, as we expected in February of this year, will remain in the range of $ 900- $ 950 per ounce by the end of the third quarter, approaching $ 1000 / ounce in the fourth quarter.

The price of gold will also be supported by the fact that problems with real producers from South Africa and Australia will lead to a decrease in the total gold production in the world, despite their growth in Russia and the United States.

Moreover, the resource of the secondary market (ie gold from scrap) has already been substantially developed in 2008.

Much will depend on the value of the dollar and ways to exit the US from a permanent budget deficit.

If the new government continues to move along the path of pumping economy with printed money, then we should expect a sharp rise in gold prices - above $ 1000 / ounce. So investing in tokens and ingots of gold will never be superfluous, especially in the long term.

We can only say that the price of silver, although it follows gold, is much more volatile, and its growth rates significantly exceeded the growth rates of gold prices over the past five years.

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The exports and imports of rough diamonds and diamonds in Antwerp in June 2009 were lower than in the same period last year, but the rate of decline in exports and imports was lower than the average decline recorded during the first half of 2009, the Antwerp International Diamond Center (AWDC), granted to the agency Rough & Polished. This trend is especially well observed with regard to rough diamonds, while in the diamond sector it is less noticeable.

According to AWDC, in June, 659,320 carats of diamonds were exported to the amount of $ 755.5 million, which means a 7.2% decrease (in physical terms) and 35% (in value terms) as compared to the same period of 2008. According to consolidated data for the first half of the year, polished exports fell by 23.9% in physical terms and by 38% in value terms compared to the same period in 2008.

The average price per carat for a diamond fell significantly during the reporting period, to $ 1145 in June 2009 (against $ 1,635 in June 2008), which represents a nearly 30% decrease. However, while the average price per carat in June 2009 was only $ 5 higher than the average price of carat for the first half of the year, the price per carat of the diamond in June 2008 was as much as $ 236 higher than the average price for the first half of 2008.

The state of the Antwerp diamond market is very ambiguous. The US market did not show any significant changes, and the volume of polished imports in the US from Belgium fell 39.3% in value in June, which is much the same as a 40.2% drop in polished purchases during the whole semester. A similar situation with purchases of diamonds from Belgium is observed in Hong Kong.

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Official unemployment in the US reached a level of 9.5% - a record for the past 25 years. It should be borne in mind that during the Clinton administration the methodology of the level of unemployment calculation was changed, if using the "Reagan" standards, then unemployment in June 2009 in the US should be estimated at 16.5%. This is an unprecedented indicator since the end of the Second World War. Unemployment in the Eurozone also reached the level of 9.5% - this is a ten-year record. In Japan, the unemployment rate was 5.2% - a five-year record. The dynamics of the unemployment rate continues to be negative, a positive decrease in the rate of its fall is already considered positive.

The United States, Japan and the Eurozone collectively consume about 80% of diamond jewelry, with the main weather in this market being made by the middle class, who suffer the most from growing unemployment. The growth of unemployment and the condition of the diamond market are in a stable correlation to each other - in the first half of 2009, polished imports in the US declined by more than 50% compared to the same period last year, imports into Japan fell by more than a third.

So far, there is no reason to say that the US, Japanese and Eurozone economies will recover to pre-crisis levels in the next 1.5 to 2 years. On the contrary, there is a steady tendency to revise forecasts in favor of pessimistic scenarios, since it is already clear that mass layoffs and salary cuts will quickly lead to a reduction in the purchasing power of the population, to a reduction in demand, which in turn leads to a reduction in production - The spiral leading to the abyss. Attempts to get out of this spin by pumping liquidity in the banking sector so far allowed only to slow down the process, but did not lead to a radical solution to the problem - voices about the forthcoming fall of the second wave of the crisis, the rapidly growing deficits of national and corporate budgets are being voiced.

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Many prominent representatives of the diamond-diamond complex are inclined to believe that the market has finally reached the bottom and will unfold in the very near future. Sinks dissolve, the demand for diamonds starts to grow, which allows us to hope for price recovery within 3 - 4 months to a level that provides a positive profitability of mining. It is expected that at the next DTC site will be sold rough diamonds for $ 700 million, and by Christmas or a maximum in the first quarter of 2010, the market is stabilizing at price levels, about 30-40% higher than the February lows of this year. If this blissful scenario miraculously becomes a reality, then it must be recognized that the diamond market is the braver of all the others coping with the global crisis; Therefore, its current structure fully meets the requirements of the time and,

Opponents draw not so rosy picture. Analysts at Frost & Sullivan believe that demand for rough diamonds will not increase in either the short or medium term, and diamond production in Africa will continue to decline steadily for at least another year and a half. This view is shared by analysts at Royal Bank of Canada Capital Markets (RBCCM), who argue that the bottom has not yet been reached by the market. With the colleagues from RBCCM, the representatives of the Israeli banking community are clearly in agreement, having reduced lending to the lapidary industry by more than 30%. Banks do not believe in a rapid recovery in demand for diamonds, and we must admit that they have objective reasons for this. In the US, unemployment has reached an unprecedented level in the past 25 years, the Japanese economy is falling even faster than the American economy - the purchasing power of the population of these countries, Which accounted for about 60% of the diamond products market, continues to decline. The first quarter of 2009 showed an unprecedented drop in profits of companies owning world jewelry brands (Tiffany & Co., for example, showed a net profit of 62.7% worse than in the same period in 2008). China is unlikely to be able to compensate for this gap at least somehow - while we can observe energetic (albeit not too successful, as in the case of Rio-Tinto) attempts by China's sovereign funds and companies to acquire raw materials around the world, but not to stimulate Domestic demand. Exports, which gave up to 50% of China's GDP, have now halved, and the real number of unemployed is approaching the 40 million mark. The first quarter of 2009 showed an unprecedented drop in profits of companies owning world jewelry brands (Tiffany & Co., for example, showed a net profit of 62.7% worse than in the same period in 2008). China is unlikely to be able to compensate for this gap at least somehow - while we can observe energetic (albeit not too successful, as in the case of Rio-Tinto) attempts by China's sovereign funds and companies to acquire raw materials around the world, but not to stimulate Domestic demand. Exports, which gave up to 50% of China's GDP, have now halved, and the real number of unemployed is approaching the 40 million mark.

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Ian Smillie, one of the architects of the Kimberley Process (KP), announced his withdrawal from the leadership of the NGO Partnership Africa-Canada. On June 2, 2009, he gave an interview to the newspaper Le Temps, in which he linked his resignation with the extremely low efficiency of the CP in a number of diamond-producing countries: Brazil, Cote d'Ivoire, Ghana, Venezuela, Zimbabwe, Guinea, as well as uncontrolled diamond traffic In the Middle East - in Lebanon. In fact, Ian Smilli acknowledged the failure of the KP Certification Scheme, confirming the possibility of acquiring KP Certificates by shadow dealers using corrupt schemes and even describing the approximate cost of such a transaction: "For a person with rough diamonds worth several tens of millions of dollars, paying $ 50,000 for a Kimberley certificate is nothing".

We could discuss with Ian Smilli about the size of the bribe - according to our information, in the countries he mentions in his interview, as well as in dozens of other, equally civilized member states, getting the notorious certificate costs the smugglers ten times cheaper. But this does not change the fundamental picture, and we willingly agree with the disappointed Ian Smilli that the KP was ineffective in achieving the declared goals. Since there is no secret to this unfortunate circumstance for a long time, it would be very interesting to answer the question - why did I see Smilly's epiphany right now, during the unprecedented crisis of the diamond market?

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