Friday, July 19, 2024

De Beers diamond sales up ahead of holidays

Debswana Mining Company’s parent company, De Beers has said that it has sold $630 million of rough in its seventh sales cycle this year as diamond cutters increased their demand for stock ahead of the forthcoming holiday season.

In a statement released to the markets late Thursday, De Beers indicated that revenue grew from a revised $528 million in the previous cycle to $630 million during the latest sight. 

“We saw healthy demand for our rough diamonds,” De Beers Chief Executive Officer Bruce Cleaver said in the statement. “Manufacturers brought forward some of their demand in order to cut and polish rough diamonds in time for the important retail selling season.”

The diamond industry is seasonal, with the holiday period from Thanksgiving in November through the Lunar New Year in Asia in January or early February the busiest period for jewelry sales. De Beers, which is owned by the Botswana Government and Anglo American, holds 10 sights in a year.

Available figures shows that rough-diamond prices have since rebounded 4.7 percent this year after De Beers and rival Alrosa PJSC cut off supply to try to support the market. In 2015, the precious stones slumped 18 percent as slowing Chinese demand and an industry-wide credit crunch curbed purchases. 

Over the past two years, the absence of demand for diamonds put De Beers under pressure as it could not continue with its initial production target. In response to the soft conditions exhibited by the market, Chief Financial Officer Gareth Mostyn highlighted in February 2016 that three counter measures which De Beers put in place as an attempt to defy the 2015 tough conditions.

Mostyn explained that close to the end of 2015, initial feedback from the key selling Christmas season in America suggested that it was a reasonably good year, adding that mid-single percentage growth year on year was observed. He described midstream industry as a fragmented sector in terms of the number of varied cutters and polishers. This, he said, makes it difficult for De Beers to gather specific numbers on stock levels. 

“Our sense is that the level of stock in midstream has rebalanced somewhat, and we believe that behind the pickup in demand that we’ve seen in the first sight in 2016 the midstream is in a slightly better place now in terms of stocks,” he said.

At the end of 2014 weaker than expected consumer demand left retailers holding higher stocks, leading to a build-up of inventory throughout the pipeline and Sightholders purchasing lower volumes of rough diamonds from De Beers. A year later, financial results showed that the rough diamond market weakness weighed on the world’s largest diamond company. In the financial year ended December 31, 2015, the group recorded a 36 percent decline in rough diamond sales which pushed total revenue down to US$4.7 billion. 

At the same time, weaker than expected consumer demand coupled with a build-up of stocks and a cash-crunch among diamond traders put downward pressure on the polished diamond prices and the mid-stream industry. 

Debswana Mining Company Managing Director Balisi Bonyongo admitted in March 2016 that subdued demand for diamonds continues to put De Beers under pressure as Debswana could not continue with its initial production target. In 2015 the local diamond mining giant reduced its carat production by 3 million carats against budget in response to prevailing market conditions. 

“We are beginning to see the benefits of the actions we took and our first two sales cycles of the year have been very positive. But it is still a very volatile and uncertain economic environment.”


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