Tuesday, December 7, 2021

De Beers slump continues in second sales circle

BY BONNIE MODIAKGOTLA

De Beers has recorded another slump in rough diamond sales in the second sight of the year as the diamond mining giant continues to struggle with subdued demand for lower value diamonds.

The provisional rough diamond sales for the second sight, also known as sales cycle, came at about $490million (P4.9 billion) – a decline of 12.9 percent from 2018’s second sale of $563 million (P5.6 billion) and a two percent drop the first sales cycle of the year which netted $500 million (P5 billion).

Commenting on the latest sale, De Beers CEO Bruce Cleaver said: “Demand for rough diamonds remained consistent during the second sales cycle of 2019. While overall demand for lower value rough diamonds remains subdued, we did see an increase in demand from India as factories begin to restock.”

The two rough diamond sales of the year so far amount to $990 million (P9.9 billion), making it the lowest since the mining company started publicly publishing its rough diamond sales in 2016. The first sight is usually the largest for De Beers, but this year it disappointed as it fell by 25.5 percent from the prior year’s corresponding period.

Traditionally, the first sight of the year has always been the largest of the year as traders and manufacturers return to the market after working down their inventories over the festive selling period. The decline was attributed to “the slow movement of lower value rough diamonds through the pipeline”.

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. However, last year the biggest producer by value took an unusual move.

Concerns over decreasing demand for lower value rough diamonds gained momentum in mid-2018, forcing De Beers to break with its tradition and allowed buyers to postpone their purchase of some lower-quality stones, with the condition that they still had to purchase their quota of gems before the end of the year. This resulted in the unusually higher sales recorded in the last sight of 2018, which is even higher than this year’s opening sale ÔÇô an uncommon occurrence for De Beers.

The effect of slowed demand for smaller or lower value rough diamonds is being felt across the diamond industry, with De Beers’ main competitor, Alrosa, also reporting lower rough diamond sales. Russia’s Alrosa is the world’s biggest diamond producer by volume, but it produces large amounts of smaller diamonds, allowing De Beers to claim the tittle of biggest diamond producer by value.

According to diamond industry experts, the market for small rough diamonds has been subdued for months as high inventories, oversupply and financing issues in the midstream has softened demand, making it difficult for the miners.

Still, Alrosa’s CEO Sergey Ivanov has echoed similar sentiments as Cleaver, noting that they are seeing recovery in India’s midstream activity. The midstream represents the cutting and polishing of diamonds, and India is home to the world’s largest diamond cutting and polishing industry, with experts estimating that 80 to 90 percent of diamonds are cut and polished in India.

While De Beers is having the worst start to the year, the company performed well in the prior year: In 2018, De Beers hit its lower end of its production target, unearthing 35.3 million carats, an increase of 6 percent from 2017’s 33.5 million carats. Moreover, the mining giant sold rough diamonds worth $5.4 billion (P54 billion), a slight figure above $5.3 billion (P53 billion) earned in previous year and 2016’s sales of $4.12 billion (P41 billion).

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