As global diamond prices continue to fall, Angola, Africa's largest producer, has instead moved to expand output. The strategy is to offset lower prices with volume, drawing attention to why it has pulled the "production increase card" despite oversupply and weakening demand.
According to Bloomberg on the 15th (local time), the Angolan government set this year's diamond production target at 16.2 million carats, about 7% higher than a year earlier. The average price is expected at $150 per carat, and based on that, annual revenue is projected to reach about $2.43 billion (about 3.577 trillion won).
The diamond industry is under growing downward price pressure. Lab-grown diamonds, which have the same composition as natural stones but cost one-tenth as much, are eating into the market. On top of that, a slower economic recovery in China, the largest consumer, has sharply reduced demand for high-end jewelry. With these factors combined, the average trading price per carat has fallen from around $150 to the low $100s recently. Angola's diamond output surged 70% last year from the previous year, but revenue rose only 6.7%.
Bloomberg said Angola is increasing diamond production to make up for revenue shortfalls from price declines with volume. Secretary of State for Mineral Resources Janio Correia Victor said at an event in the capital, Luanda, "We are offsetting the drop in international market prices by increasing production." Angola plans to continue expanding output based on exploration and investment by international corporations. State diamond company Endiama is also considering participating in the acquisition of equity in De Beers, the world's largest diamond company.
Ninety percent of Angola's current output comes from the Catoca and Luele mines. The Angolan government's strategy is to accelerate kimberlite (volcanic rock containing diamonds) mining based on these giant mines and not relinquish market leadership until prices recover.