DIAMOND prices, headed for the first annual drop in four years, are set to get a boost in 2013 as De Beers - the world's biggest producer -- constrains supply. De Beers, owned by Anglo America Plc, forecasts that it will produce about 27 million carats this year - a 14 percent decline from 2011. It expects stable production in 2013, bolstering prices that have slumped 16 percent this year.

The development will come as welcome news for Zimbabwe that has recently been given the green light to freely trade and export the gems.

"The supply is going to be constrained next year so we have an opportunity for further price growth in 2013," chief executive Philippe Mellier said in an interview with Bloomberg Television. "This year we're going to produce around 27 million, we will be around that number next year."

Rough diamond prices have slumped 16 percent this year as Asian purchases slowed and the euro region debt crisis eroded demand, according to data compiled by WWW International Diamond Consultants Ltd. Prices have risen by more than 20 percent in each of the past three years as producers struggled to keep pace with consumption.

De Beers' 2012 production will be the lowest since 2009 when it slashed output by 50 percent amid the global financial crisis. The 27 million carats it plans to produce this year represents a 43 percent decline from its pre-crisis output in 2008.

"We are now focusing a lot of our effort to try to see where to mine, when to mine so that we can produce the right diamonds and the right quantity to suit the market," said Mellier. "We adapt to the marketplace."

Diamond producers have struggled to find new large mines to replace ageing assets. Production at many of the biggest mines is falling as supplies of more accessible diamonds near the surface are depleted.

De Beers's Orapa mine in Botswana began output in 1971, while its Jwaneng project, the world's largest diamond mine by production value, and Rio Tinto Group's Argyle started in 1982. The last major mine to enter production was Rio's Diavik in 2003. Diamond production slid 8,5 percent to 161,1 million carats in 2008 from 2005.

The use of diamonds may expand at double the pace of supply through 2020 because of a growing middle class in China and India, according to Bain & Co., the consulting firm. Bain forecasts that pre-crisis supply won't return until 2017.

Mellier (57), and a mechanical engineer with a background in cars and trains, was appointed as CEO in May 2011 as De Beers broke with a tradition of promoting internally. Growing Chinese demand will help bolster prices next year as miners struggle to keep pace with growing consumption in emerging economies.

Chinese and Indian demand accounted for about 20 percent of global diamond demand this year and that share will rise to 28 percent in 2016 as the diamond market grows from US$23 billion to US$31 billion, according to an Anglo American presentation last month.

The diamond market will grow about 3 percent to 4 percent this year compared with growth of 10 percent in 2011, Mellier said. De Beers forecasts "at least this type of growth" again in 2013.

The US market, the biggest consumer of diamonds, will expand 3 percent to 4 percent next year, while China will grow at about 10 percent. Indian demand will expand at a "minimum" of 5 percent after a "disappointing" 2012 when demand was flat, the CEO said.

"As a whole, US steady growth, China increased growth, India coming back. I think 2013 should be better than 2012 so the prospect for growth is there," Mellier said.

Anglo American bought the Oppenheimer family's 40 percent in De Beers for US$5,1 billion this year, increasing the company's holding to 85 percent and ending the dynasty's 80-year ownership of De Beers. Botswana owns the rest of the business.

Formed by British colonist Cecil John Rhodes more than 120 years ago, De Beers mines diamonds in South Africa, Canada, Botswana and Namibia.

Founded in Kimberley, where diamond diggings established South Africa's mining industry, De Beers was named after a nearby farm. Ernest Oppenheimer, who founded Anglo in 1917, took control in the 1920s. His son and grandson, Harry and Nicky, built De Beers into a business that now supplies about a third of the world's rough diamonds.