Wednesday, November 23, 2011

Debswana moves cautiously as diamond sales slump


Prices down by up to 50 percent

Debswana has embarked on a cost saving and re-prioritisation exercise to mitigate the effects of the current market volatility, deteriorating global economic conditions and a decrease in both demand and prices of rough diamonds experienced in the past few weeks.

According to a statement by Debswana’s Group Manager- Corporate and Public Affairs, Esther Kanaimba-Senai, the trading of rough diamonds in the secondary market has been very depressed. As a result tenders and auction prices have reduced by 20-50%. She states that, “following the rapid price growth of rough diamonds earlier in 2011 by over 45%, the situation in the market has become more challenging in recent months with lower volumes of diamonds being traded, rough and polished prices sliding and liquidity problems being felt in the cutting centres. The reduction in polished prices has dropped to less 10% and lack of liquidity has meant that rough sales and rough prices have been under pressure”.

As a result, she notes that there is a limited amount of cash available for expert diamond cutters and polishers to make purchases.

This situation has resulted in substantially reduced rough diamond sales during the 2011 selling period which ended on 3 November 2011 and the last sight for the year is projected to be small either. The first sights of 2012 will also be impacted until the Christmas sales figures are known.

In spite of these challenges, consumers have continued to buy diamond jewellery throughput the year, with particularly strong sales in India and China and better than expected performance in the US. However, if the Christmas sales figures are revealed before end of February 2012 then things may return to normal.

According to Motswedi securities research analyst Garry Juma it is quite difficult to predict on the timeframe for more positive conditions. Juma said, “looking at the euro zone debt crisis there will be decline in mineral revenues which forms the bulk of government’s total revenues”.

In his State of the Nation address recently, President Ian Khama noted that the largest contributor to Botswana’s turnaround has been recovery in the mining sector. The turnaround, was “especially in the global demand for diamonds, which registered a positive growth of 23% in the second quarter of 2011,” Khama noted, adding that the economic outlook for 2011 is positive, with growth forecast at 5.7% in 2011 and 7.1% in 2012.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.