Investor Alert: De Beers Forecasts Diamond Price Jump By 2020

Diamond extraordinaire De Beers cautioned on Tuesday that global production of the gemstone will decline from 2020, suggesting prices for diamonds could increase exponentially.

"Unless major new discoveries are made in the coming years, supply can be expected to decline gradually from 2020," De Beers said.

According to the inaugural “Diamond Insight Report,” published by the De Beers Group of Companies, a reduction in supply from existing sources will likely not be matched by new production. Diamond supply is expected to flatten out in the second half of the decade before declining in 2020 and onwards.

Diamond mines in Botswana, South Africa and Namibia are becoming exhausted, forcing mining companies to dig deeper, making operations less profitable.

The three principal input costs – labor, electricity and diesel – have all seen increases well above local inflation levels in the primary diamond producing countries over the last decade, and the trend is set to continue.

De Beers is now turning its sights on Angola, the Democratic Republic of Congo, Zimbabwe, the Siberian Arctic and Canada.

Global demand for diamonds

The report also highlighted the demand for diamonds, which is expected to continue to grow, driven by the U.S. and from growth of the middle classes in developing markets such as China and India.

"Even under scenarios of volatile or weaker global economic growth, demand for diamonds is expected to show positive real growth in the next decade," De Beers said.

Global demand for diamond jewelry reached a record high of $79 billion in 2013.

"China and India, the engine for growth, these two big markets clearly could be as big as the US in the next maybe 15 years," De Beers's CEO, Philippe Mellier said. In addition, he expects the Chinese market to grow at more than 10% per year for "many more years".

While a supply shortage and price hike may not necessarily be good for consumers, it’s not such a bad thing for De Beers. The company accounts for roughly 33 percent of global rough diamond sales.