Saturday, September 26, 2020

De Beers closely monitoring key markets

While the diamond industry is trying to stage a comeback from a difficult trading environment, De Beers remains optimistic of a world post COVID-19, where consumers will once again clamour for its quality gems, making recovery in the battered sector possible, reveals market intelligence from the company’s latest diamond insight global sentiment report. 

The diamond mining juggernaut that used to control the diamond trade for decades says it  is working actively in the face of the COVID-19 pandemic to understand the consumer perspective and monitor how this evolves as we pass through the stages of the crisis. The company conducted a quantitative consumer sentiment study in its three major consumer markets to ascertain how people are feeling around the world and their attitudes towards diamonds at this time. The respondents included 2,800 women and men across the US, China, and India, aged 20 – 65 years. 

The survey results offered insights from customers trying to adjust from this year’ earlier global pandemic  that has infected over 20 million people and killed nearly 800,000. According to  the report,  consumers see themselves as being in a moment of change and unpredictability, which impacts consumer confidence. Still,  De Beers says it is beginning to see adjustment by consumers to their “new normal.”

This is being led by China, with 85 percent of Chinese respondents feeling at minimum they are settling into a new routine that is starting to feel familiar.  About 24 percent of the total sample said they are fully reconnected to their life and work and back to their previous routine. The country was the first to report the outbreak of the novel virus as early as November before the severity of the virus gained prominence in January after reports of its fast transmission and fatalities. China was able to contain the virus with fewer than 80,000 infects and little under 4,000 deaths. 

In the hard-hit US and India, confidence is relatively more fragile, as these countries are still battling to contain the surging infections and deaths. The US leads with the world’s highest coronavirus infections and deaths, accounting for over 5 million infections and 200,000 deaths. India is placed third with 3.2 million infections and over 100,000 deaths. A quarter of respondents in these afflicted markets feels they are modifying their daily routines, focusing on what they can control despite moments of frustration and anxiety. The USA is responsible for over 50 percent of diamond jewellery sales while India is the biggest buyer of rough diamonds. 

“Positively, in both of these markets two-thirds of consumers said they are returning to some kind of normal life and routine. Only a minority of consumers are far more pessimistic, believing that the situation is deteriorating. In the US this group represented only 8 percent of the sample; in China just 4 percent,” De Beers said in the report.

Consumers from the three markets have shown strong intentions to purchase diamonds in the future, especially as the holiday season approaches. In the US, almost 60 percent of men expressed an intention to purchase for a significant other for the holidays, while nearly a third of women stated they intended to buy diamond jewellery for themselves. In China and India, over 80 percent of men and women are very or quite likely to purchase diamond jewellery for a significant other or for themselves during the festive season.

According to the report findings, high levels of intent and expectation to acquire diamond jewellery during key festive seasons for gifting, bridal or self-purchase are driven by under-35 professionals. These consumers tend to be of middle affluence and work full-time, the report reveals. 

De Beers’ iconic message that a diamond is forever, drilled over the years to their consumers, appears to be bearing fruit during the difficult times as over 80 percent of those intending to spend in the category have either self-purchased or gifted diamond jewellery in the past two years, indicating that the intrinsic and extrinsic benefits of diamonds are valued and understood, the company said. 

“This is an important reminder that in an industry based on personal connections and relationships, we should give time and attention to our past customers.”

De Beers’ revenue fell by more than half while profit took a drastic nosedive. According to Anglo American’s financials for the six months ended June 2020, total revenue decreased by 54 percent to $1.2 billion, down from last year’s  $2.6 billion in the corresponding period. The more than half decline was due to rough diamond sales falling to $1.0 billion, compared to June 2019’s $2.3 billion sales. Rough diamond sales volumes decreased by 45 percent to 8.5 million carats after the significant impact of Covid-19 on the global diamond industry.

Anglo American owns 85 percent of De Beers while the Botswana government has a 15 percent stake. De Beers and Botswana are in one of the world’s longest lucrative public private partnerships, where they hold equal shares in Debswana, which operates the best diamond mines in the country. Every year, De Beers holds sales cycles or sights in Gaborone, where diamonds from Botswana and its other mines from South Africa, Namibia and Canada are sold to selected diamond buyers known as sightholders. 

But with the outbreak of the deadly virus earlier this year, De Beers offered Sightholders the option to defer up to 100 percent of their allocations at the fourth and fifth Sights and held some viewings for Sight 5 outside of Botswana, following the cancellation of the third Sight of 2020 due to Covid-19 related travel restrictions. The average realised price decreased by 21 percent to $119/carat, down from last year’s $151/carat, driven by a higher proportion of lower value rough diamonds being sold in the first two Sights of the year and an 8 percent decline in the average rough price index.

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