De Beers will be unable to meet sightholder demand for the next six months due to a shortfall in production, according to its chief executive, Philippe Mellier.

“We will have shortfalls for the rest of the intention to offer (ITO) period and the next Diamond Trading Company (DTC) sight will again be small,” Mellier (pictured) told a press briefing at the Hong Kong Jewellery & Gem Show. “Our production forecasts are still intact but our supply depends more on the type of goods that we can present, which may not match sightholder requests.”

DTC’s supply is based upon ITO applications made by sightholders ahead of each year’s supplier of choice contract period, which ends on March 31.

Mellier stressed that De Beers has not adjusted its previously stated forecast for production of 28 million to 30 million carats in 2012, representing a decline of up to 11 percent from 2011. The company’s production in the first half of the year fell 13 percent to 13.449 million carats. ‎

De Beers moved to focus on waste stripping and ‎maintenance during the fourth quarter of 2011 when the market started to soften. The company also lost a month of mining at its Jwaneng mine in Botswana after the group’s largest operation temporarily closed due to a fatality at the mine on ‎June 29.

Mellier acknowledged that DTC’s rough sales would be affected by the shortfall in supply but added that the impact could have been far worse if the market was in an uptrend. Overall demand has been subdued in 2012 due to the challenging economic environment with prices for 1 carat polished diamonds down 10 percent since the beginning of the year, according to the RapNet Diamond Index (RAPI).

Sightholders rejected DTC goods at the June and July sights largely as the company maintained high prices despite the drop in demand. DTC reduced its prices by an average of approximately 10 percent at the August sight.

Varda Shine, DTC’s chief executive, said the company believes that rough prices currently reflect polished prices. She added that the rough market has improved in the past few weeks as there are shortfalls of polished diamonds that have become apparent.

Shine recognized that there are opportunities in the market for very small diamonds used in the luxury watch industry and which are popular in India, as these goods have become more economically viable to produce.

She also noted that Chinese consumers have started to diversify their consumption of diamonds to lower qualities with VS-SI clarity goods becoming increasingly popular. Rapaport News reported steady demand for these goods at this week’s Hong Kong show.

Mellier added that while Chinese demand has slowed in 2012, its consumption of diamonds continues to grow, driven by expansion to tier-3 and tier-4 cities. He expects that demand will continue to improve during the fourth quarter selling season and as economic conditions have improved.

“The Hong Kong show is perfectly timed ahead of the holiday season and also as economic news has improved in the past weeks,” Mellier said. “Customer and sightholder sentiment is very important and we should be cautiously optimistic for growth. It’s easy to be gloomy but we need to be optimistic to ensure that prices will increase.”