Wednesday, May 27, 2020

De Beers records yet other low rough diamonds sale

The trend continues to play itself out as diamonds mining king De Beers reports lower rough diamond sales in the latest cycle, adding to previous sales cycles that have been disappointing as the diamond industry tries to muscle its way out of a slump caused by the over supply of polished diamonds, and waning demand for lower value stones. 

This week, De Beers reported that the provisional value of rough diamond sales in for the ninth sales circle, also known as sights, came at about $390 million, up by 31 percent from the previous eighth cycle, but down by 11.8 percent from 2018’s ninth sales circle that delivered $442 million. The drop was on the back of another poor sales performance recorded in eighth sales circle which came at $297 million, down by 38 percent from 2018’s corresponding period that fetched $482 million.

The diamond-mining giant holds ten Global Sightholder Sales and Auction Sales every year in Gaborone and the sights or auction sales are restricted to its top 80 Sightholders who buy the diamond packages at a price determined by De Beers. The mining giant opened the year with first sale that was below expectations, setting the tone that followed after, with each sales cycle performing below the previous year’s sights. 

The plunge in sales in the ninth sales circle was expected after De Beers loosened its requirements to allow its selected clients to turn down at least half of the diamonds on offer. Moreover, De Beers took a departure from the usual routine, with the company buying back 20 percent of the diamonds it sells to its clients, instead of the standard 10 percent buy back. However, diamond insiders said De Beers’ concessions will do little to stimulate an up- tick in sales this year as the main challenges facing the diamond industry were still present.

The miner has blamed this on macroeconomic uncertainty, retailers managing inventory levels, and polished diamond inventories in the midstream continuing to be higher than normal.

“With signs of increasing polished price stability, cycle 9 saw an improvement in sentiment from rough diamond buyers. Global consumer demand for diamond jewellery at the retail level continues to be broadly stable but, midstream trading conditions are still in the process of rebalancing, we offered Sightholders further flexibility during the Sight to provide support” commented the company CEO Bruce Cleaver on the latest sales circle.

Still, concerns are abound in the diamond industry as to when the diamond sector will recover. According to reports, the market for both rough and polished diamonds remains challenging due to an excess supply of polished diamonds and reduced credit available in the mid-stream of the supply chain. Liquidity issues and concerns over manufacturers’ profitability have resulted in weaker demand, while global trade disputes and unrest are also contributing factors, resulting in lower prices for rough diamonds. Weaker demand has been reported across all size classes and larger producers are withholding goods or allowing their customers to defer rough diamond allocations.

The declining diamond sales from De Beers will put the Botswana government in a tight spot as it tries a delicate balancing act on increasing public service wages against the country’ s growing deficits. Diamonds are Botswana’s main economic stay, contributing over 90 percent to exports, and remain the top foreign exchange earner.

RELATED STORIES

Read this week's paper

Sunday Standard May 24 – 30

Digital copy of Sunday Standard issue of May 24 - 30, 2020.