De Beers’s sales down $1bn so far in 2019
The company is battling a weak global diamond market, with its seventh sale of the year one of the lowest in at least three years.
De Beers’s rough diamond sales so far this year are more than $1bn below the same period in 2018, showing ongoing weakness in the global diamond market.
De Beers, which is 85% owned by diversified miner Anglo American, reported sales of $280m for August, which is the seventh of the company’s 10 annual sales events. De Beers is the world’s largest producer of rough diamonds by value. Russia’s Alrosa is the largest source of diamonds measured by carats.
The total sales value is the lowest by far since De Beers began releasing sales data in 2016.
The seventh sale is $30m more than the $250m in the sixth sale — the lowest single sale since the start of 2016, and one which is well below last year’s $503m.
The total sales in the year-to-date stands at $2.91bn compared with $3.93bn at the same time a year earlier.
“De Beers diamond sales remain well below the levels seen at this time last year in the face of continuing macroeconomic uncertainty and a slowdown in jewellery manufacturing,” said SP Angel analyst John Meyer.
One of the factors curtailing demand for rough diamonds, particularly the smaller, lower-value stones that make up the bulk of diamond miners’ production, is a large inventory of cut and polished material, needing strong consumer demand for jewellery to clear it out.
The cutting and polishing industry, which is known as the midstream segment, has cut production by nearly a third to reduce “inflated” inventory, industry specialists Rapaport said in a report earlier in August.
Rapaport singled out miners for maintaining high prices for their rough diamonds, leading to “plummeting” sales as buyers opted not to participate at prevailing prices.
De Beers has given its 80 handpicked clients called sight holders unprecedented flexibility around buying diamonds as a way to ease pressure on the industry.
“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,” said De Beers CEO Bruce Cleaver.
Feeding into the lower sales of diamond jewellery is the trade tension between China and the US, which is the single largest market for polished diamonds particularly in the run-up to the end of the year, as well as violent protests in Hong Kong, which Rapaport said had negatively affected wholesale and retail sales.
Alrosa is also struggling. Earlier in August in noted its second-quarter revenue had fallen by nearly 20% compared with the first quarter’s performance, with diamond sales falling by 22%.
Alrosa expects full-year sales of up to 33-million carats despite production increasing to 38.5-million carats from an earlier target of 38-million carats.
Alrosa deputy CEO Alexey Philippovskiy noted the difficulties facing the diamond industry had surfaced during the second half of 2018. Alrosa had unsold stocks of 16-million carats at the end of June.
Alrosa’s first-half sales fell by a third to $1.8bn.
These difficulties included “a slowdown in jewellery sales following strong performance of 2017/2018, particularly as a result of global macroeconomic uncertainties amid escalating trade wars”, Philippovskiy said in a statement on August 19.
“As an additional factor, midstream and retailers have elevated inventories, while India’s cutting and polishing business continues facing difficulties in securing affordable financing,” he said.
Alrosa also picked out changing buying and selling patterns in the US for diamond jewellery as a factor for the state of the market.
“The consolidation in the jewellery sector and an expanding share of online jewellery sales in the US resulted in a non-recurrent reduction in polished diamond stocks across the retail sector as businesses embrace more efficient stock management practices, translating into lower diamonds volumes purchased by cutters and polishers.”