Monday, September 20, 2021

De Beers’s third sales circle down by 8%

Anglo American Plc has posted lower provisional diamond sales for De Beer’s third sales cycle of 2018 amounting to $520 million, down by 8 percent from the $563 million fetched during the second sales cycle. The provisional figures for the third cycle ÔÇôalso known as sights ÔÇô is 11 percent lower than figures recorded in the previous corresponding period of 2017.

De Beers, the world’s biggest diamond producer by value, opened the year strongly with $672 million worth of diamonds in its first sale of the year before declining by 16 percent in the second sales cycle. The three sales sights for the year are 6 percent down from last year’s comparable period.

While the outlook might be raising concerns in certain quarters, Bruce Cleaver, De Beers CEO, is optimistic about the state of the market. “While the second quarter of the year is traditionally a seasonally slower period, we continued to see good rough diamond demand in the third sales cycle of 2018 as diamond businesses have focused on restocking following healthy consumer demand for diamond jewellery in the US and China.”

Industry insiders say De Beers has historically recorded stronger sales in the third cycles compared to the second cycles. However, this year’s drop in the third sight sales has been anticipated given the recent developments: heavy buying early in the year, and unconfirmed reports that De Beers had raised prices between 1 and 2 percent, a similar percentage increase as in its previous sale at the end of February. The price adjustments were first reported by Bloomberg’s Thomas Biesheuvel who relied from people familiar with the matter that De Beers has raised its rough diamond prices for the second consecutive cycle.

Further giving credence to reports of price increase is Paul Zimnisky, who maintains the Zimnisky Global Rough Diamond Price Index, noting in his State of the Diamond Market newsletter that rough diamond prices are up approximately 2 percent year-to-date in 2018.  Moreover, according to figures from the Antwerp World Diamond Centre, the average price of imports of rough diamonds to Antwerp has risen by 10 percent in the first three months of 2018, to $120 per carat from $109 per carat.

The diamond industry is seasonal, with the holiday period from thanksgiving in USA in November through the Lunar New Year in Asia in January or early February the busiest period for jewellery sales. January is also a seasonally busy month for the rough sector as traders and manufacturers return to the market after working down their inventories over the festive selling period.

The mining giant holds ten Global Sightholder Sales and Auction Sales every year in Gaborone and the sights or auction sales are restricted to the top 85 customers who buy the diamond packages at a price determined by De Beers.

Meanwhile, De Beers has reportedly dropped Gitanjali Gems from its list of sightholders following the alleged involvement of Gitanjali owner and managing director Mehul Choksi in a $1.77 billion fraud at Punjab National Bank (PNB), together with his billionaire nephew Nirav Modi. In an article published in the Times of India on February 22, 2018, De Beers group clarified that the company would not do business with firms not complying with financial propriety and industry reputation issues.

De Beers is majority owned by Anglo American Plc and the Botswana government which holds the remaining 15 percent. The diamond company is also the other half of Debswana, a joint venture with the government. Debswana operates four diamond mines in the country (Orapa, Letlhakane, Damtshaa and Jwaneng). Jwaneng mine is largest and most valuable mine in the world. Diamonds are the mainstay of Botswana’s economy since they were discovered shortly after the country gained independence. The partnership between the government and De Beers is one of the longest known public-private partnerships, stretching to 50 years.  The country is yet to diversify its economy away from its main export despite imminent threats in the diamond industry that includes competition from synthetic diamonds.

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