Photographer: Ben Nelms/Bloomberg

Trump Can Help Spur Diamond Sales Rebound, Top Producer Says

  • Lower taxes, more jobs would boost spending power: De Beers
  • Less clear is effect of Trumponomics on the rest of world

Here’s yet another commodity that stands to benefit from Donald Trump’s policies: diamonds.

“It’s likely to be positive, certainly in the short-term -- lower taxes, more jobs, translates into more disposable income and translates into more diamond purchases,” Bruce Cleaver, chief executive officer of top producer De Beers, said in an interview Tuesday in Bloomberg offices in New York.

If the president-elect’s policies do lead to increased demand for luxury items in the U.S., it would give a further boost to a modest recovery forecast for diamonds, according to Cleaver. De Beers, a unit of Anglo American Plc, expects sales to be flat or slightly lower this year, partly because of U.S. dollar strength, before increasing “a little bit” next year.

De Beers reported a decline in prices of about 7 percent in the first half and Cleaver said polished diamond prices are “reasonably stable” in the second half. The price outlook for next year probably isn’t “wildly out of kilter” with its sales forecast, Cleaver said.

Longer term, the market will be supported by the prospect of demand growth outstripping supply expansion by 2018 or 2019, he said. Exploration is difficult and De Beers is unaware of any discoveries that would change a flat supply curve.

Industrial commodities from copper to iron ore extended a rally after the U.S. election as investors focused on additional demand from as much as $1 trillion in infrastructure spending.

While deregulation generally is good for business, it’s less clear what the effect of Trump’s policies will be for the rest of the world, Cleaver said, with a stronger U.S. dollar making commodities more expensive in other currencies.

He expects some consolidation in the cutting and polishing and retail parts of the diamond business, although mergers and acquisitions among diamond miners will be unlikely.

‘Great Opportunities’

China and India offer “great opportunities” to grow demand, he said. “As more and more middle-class homes come on stream in countries that are growing, there are more and more potential diamond consumers.”

Earlier this month, De Beers announced it would flood its unprofitable Snap Lake diamond mine in Canada’s Northwest Territories as a less-expensive method of keeping the site on care and maintenance. Although the company believes the mine could be restarted in the future, depending on market conditions, that may become more difficult the longer it’s left underwater, Cleaver said. De Beers has no time frame for reclaiming the site, he said.

Meanwhile, the company is exploring “all options” for its Victor mine in Northern Ontario, which is scheduled to close in 2018 or 2019, Cleaver said. Its proposed Tango extension would extend the mine’s life but would require approval from local aboriginal groups. No adviser has been hired as De Beers is running the evaluation process internally, he said.

Before it's here, it's on the Bloomberg Terminal.