The diamond mining juggernaut De Beers’ rough diamond sales for the latest cycle have fallen by almost halve, continuing the downward spiral in sales that has gripped the mining company since the beginning of the year.
On Wednesday De Beers reported that the value of rough diamond sales in for the seventh sales circle, also known as sights, has plunged to $280 million, down by 44 percent from 2018’s seventh sales circle that delivered $503 million. The drop is sales was on the back of another poor sales performance recorded in sixth sales circle which came at $250 million, a decline of over 50 percent from 2018’s corresponding period that fetched $533 million.
The fifth sales circle for the year was another disappointment, with De Beers recording a 20 -month low rough diamond sales valued at $391 million, a decrease of 33 percent from 2018’s fifth sight.
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 plunge in sales in the seventh 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 during the seventh sight 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 midstream participants continuing to work down polished diamond inventory levels and reduced levels of manufacturing in the key cutting centres, De Beers Group provided customers with further supply flexibility during the seventh cycle of 2019,” 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 the Botswana’s main economic stay, contributing over 90 percent to exports, and remains the top foreign exchange earner.