Chinese jewellery demand decline shadows Canadian Arctic diamond sector's sparkle

The commodity slump caused by China is adversely affecting some of the biggest raw material markets in the world, and now it shades the sparkle that Canada's Arctic diamond industry once had.

Reuters reported that diamond prices are declining due to the slow growth of Chinese jewelry demand adversely affecting Canada's long-term prospects for its diamond industry.

Canada's Northwest Territories (NWT), the third biggest producer of diamonds in the world, is expected to decrease its exploration spending by 54 percent in 2015. This is detrimental to an industry that takes 10 to 20 years before turning into a profitable mine.

NWT executive director Tom Hoefer said this condition is worrisome, especially since exploration is the main source of income in mining.

According to Mail & Guardian Africa, the cooling demand for diamond in China could hurt various diamond producing nations including Africa, Australia, Russia, and Canada, which accounts for 99 percent of global production of the precious stone in 2013.

Mining writes that Zimnisky Global Rough Diamond Price Index diamond prices dropped almost 12 percent in the last year, lowering producers' profits. Prices slumped even lower during the second half of 2015. The onslaught continued to trouble the diamond sector, as dealers are having a hard time selling their inventory to softening markets, especially China, which is the second largest consumer of diamonds in the world next to the United States.

The top producer of diamonds in terms of value is the Anglo American-owned De Beers. It expected growth in sales in China this year. Last year, it grew 5 percent from 29 percent in 2011. The firm forecasted a poor demand for diamond jewelry in a global scale in its 2015 yearly outlook.

Miners are now lowering production as a strategy to keep up with the supply glut. De Beers even cut off its global output three times this year.