De Beers Aiming For Annual Rough Price Hike of 5%, Says Mellier

(IDEX Online News) – De Beers plans to raise diamond prices by 5 percent annually on the assumption that demand will continue to rise, thus meeting parent company Anglo American Plc’s target for returns from the miner.

“We know the long-term trend, we know demand is going to be bigger than supply,” De Beers CEO Philippe Mellier told Bloomberg News. “One of the objectives is more stable prices and to drive volatility out.”

Rough diamond prices have risen around 10 percent on average so far this year. Anglo American, owns 85 percent of De Beers, and wants its units to deliver a 15 percent return on capital by 2016.

“We have a plan to get there,” Mellier said, adding De Beers returned 10 percent on capital last year. “My team is very focused. It’s our one objective, the objective.”

Diamonds accounted for around 19 percent of Anglo American’s $33 billion in sales in 2013.

De Beers forecasts global diamond demand will grow 4.0-4.5 percent this year. The U.S. market, which accounts for about 37 percent, is forecast to gain in “high single digits” in 2014, while there is “good momentum” in China, Mellier said.

He also forecasts a rebound in India this year after a collapse in the rupee last year hit sales hard. The country’s share of global demand should increase to 10 percent from about 8 percent last year, Mellier said.

De Beers has already raised prices 5 percent and further increases are unlikely this year, Mellier said. That would provide comfort to banks that finance De Beers’ customers. Antwerp Diamond Bank, one of the leading lenders to the industry, said last month it was cutting advances to clients after diamond producers pushed up prices too far.