De Beers will increase the prices of its rough goods by 5 percent per annum, confident that global demand will continue to rise.
The rise in prices will enable the miner to meet the 15 percent return on capital target set by parent company Anglo American Plc, which owns 85 percent of the diamond 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.”
Prices of rough goods have risen by approximately 10 percent on average so far in 2014.
“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 comprised about 19 percent of Anglo American’s $33 billion in sales in 2013.
De Beers believes worldwide diamond demand will grow by up to 4.5 percent in 2014. The American market, which accounts for about 37 percent of supply, is forecast to gain in the “high single digits” this year, while there is “good momentum” in China, Mellier said.
Mellier beileves a rebound in India this year after a collapse in the rupee last year hit sales of rough stones. 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.