Sanctions-hit Alrosa, the world’s biggest diamond-producing company, said on Sunday it has mined the largest gem-quality diamond in Russia in the past decade.
The 390.7-carat diamond was mined at one of the company’s mines in the Republic of Sakha, Alrosa said in a statement. The region, commonly known as Yakutia, lies in Russia’s Far East along the Arctic Ocean.
“The found diamond is a light crystal of an irregular shape, bordered by a yellow-brown halo – a combination of mass, shape and colour that is unique today,” Alrosa said.
The company mined the largest gem-quality diamond in Russia in 2013, weighing 401 carats, Alrosa said.
The world’s largest gem-quality diamond ever mined – the 3,106-carat Cullinan stone – was recovered in South Africa in 1905.
Alrosa was last year placed under sanctions by the United States, which cut it off from its banking system and banned direct sales to the US market after Russia invaded Ukraine.
Last month the company reported a rise of 0.2% in revenue for the first half of the year but said net profit fell 35% year-on-year to 55.6 billion roubles.
The Gemological Institute of America (GIA) has cut some 20% of the workforce at its Carlsbad, California, headquarters amid a prolonged slowdown in the industry.
In late July, the lab let 151 employees go, primarily in its laboratory, as well as some in corporate positions, Stephen Morisseau, the GIA’s director of communications, told Rapaport News Sunday. The lab made the layoffs as a result of a drop in the number of diamonds submitted for grading.
“Many organizations in the global gem and jewelry sector are experiencing a downturn due to economic conditions affecting the global gem trade,” Morisseau explained. “Due to those economic conditions, there has been a decline in demand for GIA’s gem identification and grading services, which led to the difficult decision to reduce staffing.”
The layoffs will bring the GIA’s total workforce in Carlsbad to 600, according to The San Diego Union-Tribune, which was the first to report the story. Globally, the lab has approximately 3,500 employees.
“The reductions will not affect our ability to advance our important consumer-protection mission, nor to meet the needs of our clients,” Morisseau added.
One of the world’s most popular types of rough diamonds has plunged into a pricing free fall, as an increasing number of Americans choose engagement rings made from lab-grown stones instead.
Diamond demand across the board has weakened after the pandemic, as consumers splash out again on travel and experiences, while economic headwinds eat into luxury spending. However, the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market.
The reason, according to industry insiders, is soaring demand for lab-grown stones. The synthetic diamond industry has paid special attention to this category, where consumers are especially price-sensitive, and the efforts are now paying off in the world’s biggest diamond buyer.
The shift doesn’t mean engagement rings are about to go on deep discount — the impact is limited to the rough-diamond market, an opaque world of miners, merchants and tradespeople that is several steps removed from the price tags in a jewelry store.
However, the scale and speed of the pricing collapse of one of the diamond industry’s most important products has left the market reeling. Now, the question is whether the plunging demand for natural diamonds in this category represents a permanent change, and — crucially — if the inroads made by lab-grown gems will eventually spread to the more expensive diamonds that are typically dominated by Asian buying.
Industry leader De Beers insists the current weakness is a natural downswing in demand, after stuck-at-home shoppers sent prices soaring during the pandemic, with cheaper engagement rings having been particularly vulnerable. The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.
“There has been a little bit of cannibalization. That has happened, I don’t think we should deny that,” said Paul Rowley, who heads De Beers’ diamond trading business. “We see the real issue as a macroeconomic issue.”
Lab-grown diamonds — physically identical stones that can be made in a matter of weeks in a microwave chamber — have long been seen as an existential threat to the natural mining industry, with proponents saying they can offer a cheaper alternative without many of the environmental or social downsides sometimes attached to mined diamonds.
For much of the last decade, the risk remained unrealized, with synthetics eating away at cheaper gift-giving segments but making limited headway otherwise. That is now changing, with lab-grown products starting to take a much bigger bite of the crucial US bridal market.
De Beers has responded to weakening demand by aggressively cutting prices for the category known as “select makeables” — rough diamonds between 2 and 4 carats that can be cut into stones about half that size when polished, yielding centrepiece diamonds for bridal rings that are high quality, but not flawless.
De Beers has cut prices in the category by more than 40% in the past year, including one cut of more than 15% in July, according to people familiar with the matter.
The one-time monopoly still wields considerable power in the rough diamond market, selling its gems through 10 sales each year in which the buyers — known as sightholders — generally have to accept the price and the quantities offered.
Price drop De Beers typically reserves aggressive cuts as a last resort, and the scale of the recent price falls for a benchmark product is unprecedented outside of a speculative bubble crash, traders said.
In June 2022, De Beers was charging about $1,400 a carat for the select makeable diamonds. By July this year, that had dropped to about $850 a carat. And there may be more room to fall: the diamonds are still 10% more expensive than in the “secondary” market, where traders and manufacturers sell among themselves.
De Beers declined to comment on its diamond pricing.
One of the clearest signs of the traction being made by lab-grown diamonds is their share of diamond exports from India, where about 90% of global supply is cut and polished. Lab-grown accounted for about 9% of diamond exports from the country in June, compared with about 1% five years ago. Given the steep discount that they sell for, that means about 25% to 35% of volume is now lab-grown, according to Liberum Capital Markets.
The impact on De Beers was clear in the first half. The Anglo American Plc’s unit’s first half profits plunged more than 60% to just $347 million, with its average selling price falling from $213 per carat to $163 per carat. Its August sale was the smallest of the year so far.
De Beers has responded by giving its buyers additional flexibility. It’s allowed them to defer contracted purchases for the rest of the year of up to 50% of the diamonds bigger than 1 carat, according to people familiar with the situation.
While lab-grown diamonds are currently hurting demand for natural stones, the upstart industry is also suffering. The price of synthetic diamonds has plunged even more steeply than that of natural stones, and are selling at a bigger discount than ever before.
About five years ago, lab-grown gems sold at about a 20% discount to natural diamonds, but that has now blown out to around 80% as the retailers push them at increasingly lower prices and the cost of making them falls. The price of polished stones in the wholesale market has fallen by more than half this year alone.
De Beers started selling its own lab-grown diamonds in 2018 at a steep discount to the going price, in an attempt to differentiate between the two categories. The company expects lab-grown prices to continue to tumble, in what it sees as a tsunami of more supply coming onto the market, Rowley said. That should create an even bigger delta in prices between natural diamonds and lab-grown, helping differentiate the two products, he said.
“With the increase in supply we’ll see prices fall through the price point and reach a level where, long term, it does not compete with bridal because it comes too cheap,” said Rowley. “Ultimately they are different products and the finite and rarity of natural diamonds is a different proposition.”
Petra Diamonds’ rough prices decreased at its first tender of the fiscal year as the anticipated pickup in demand proved disappointing.
The August trading session brought in $79.3 million from the sale of 696,194 carats, with like-for-like prices — those for similar categories of diamonds — falling 4.3% compared with May, the miner reported Friday.
The slowdown was primarily due to flagging prices for rough between 2 and 10.8 carats, which dropped 14% on a like-for-like basis. Prices for diamonds under 2 carats rose 1% to 2%, Petra noted.
While the tender saw strong attendance, “demand was more muted than we had expected in exiting the summer holiday period,” explained Petra CEO Richard Duffy. “The expected seasonal improvement in demand was evident for higher-quality 10.8-carat-plus stones, with solid prices realized. [However,] this was offset by slower demand for 2- to 10-carat size ranges.”
The miner did not sell any exceptional stones during the tender, it reported, though it did garner $1.7 million for a 20.9-carat yellow diamond from its Cullinan deposit.
Overall sales value rose 88% from May’s $42.1 million but slid 23% from the equivalent tender a year earlier, which took place in September 2022. Sales volume was up 49% from May and 34% year on year, while the average price jumped to $114 per carat from the previous tender’s $90.
The August tender did not include any output from the Williamson mine; Petra plans to sell material from that site at its September sale. However, the latest round did feature all the rough Petra had chosen to defer in June, when it postponed its sixth tender due to the sluggish market.
The August sale also contained 75,880 carats of goods that Petra had withdrawn from the May tender due to low bids. Prices for those goods were largely unchanged from May’s offers, but Petra expects demand to rise in the coming months.
“As we enter a seasonally stronger period [that] includes Diwali, Thanksgiving, Christmas and the Chinese New Year, we remain optimistic that jewelry demand will improve and provide some support to prices over the balance of the calendar year,” Duffy said.
Main image: Ore processing at the Williamson mine.
Julian Ogilvie Thompson, former chairman and CEO of De Beers as well as of its parent company, Anglo American, died on August 11 aged 89.
Ogilvie Thompson, a South African native, first joined Anglo American in 1956. He was promoted to personal assistant to then chairman Harry Oppenheimer a year later, De Beers told Rapaport News. In 1966, he joined the board of De Beers, and he became deputy chairman in 1982. Three years later, Ogilvie Thompson took over as executive chairman of De Beers, while Oppenheimer’s son, Nicky, filled his previous role.
In 1997, Ogilvie Thompson retired as chairman but remained deputy chairman until stepping down from the company in 2002. He was committed to supporting the development of young leaders from across Africa, forming an 18-year affiliation with the Mandela Rhodes Foundation, which offers scholarship and leadership programs to youth throughout the continent.
“Julian Ogilvie Thompson — often known in the business simply as JOT — was a hugely influential figure in the history not only of De Beers and Anglo American, but also in the broader South African landscape,” a De Beers spokesperson said. “As the former chairman and chief executive of both Anglo American and De Beers, and as a proud South African, he played a key role in shaping both companies and the nation.”
De Beers will allow sightholders to defer up to half of rough purchases to early next year amid sluggish consumer demand and high midstream stockpiles, market insiders told Rapaport News Wednesday.
The miner wrote to customers on Friday, informing them that they could avoid buying parts of their allocations of 1-carat goods and larger for the rest of 2023, the sources said on condition of anonymity. The allowance is 25% by value for some boxes and 50% for others, and applies to sights 8 to 10 — which will take place in September, October and December.
The rule does not apply to the August sight, which runs this week in Botswana, they added.
De Beers does not usually let sightholders defer more than one box per category of rough diamonds in each half year. In normal circumstances, failure to buy can affect access to goods in future intention-to-offer (ITO) periods — the yearlong session for which allocations are planned.
The new concession is unusual because it allows buyers to push off purchases to a new ITO. De Beers did not specify when the final deadline would be in early 2024, the sources said.
However, it told clients they must buy at least 65% of the non-deferred goods or the deferred stones will count as refusals, the sources explained.
The move comes amid persistent weak retail sales in the US and China. Manufacturers have been carrying large inventories of the less salable polished, especially in the 0.30- to 2.99-carat sizes that originate from rough above 0.75 carats.
“There is already a buildup of polished, and therefore there is enough…to fulfill the demand for the holiday,” said one of the sources. “[De Beers will] keep [the rough] for you rather than sightholders needing to buy it and store it themselves.”
Rough prices were stable at this week’s sight, while the buyback policy remains unchanged, the market participants noted. This allows clients to sell up to 10% or up to 30% of purchases back to De Beers, depending on the category.
“We continue to provide sightholders with elements of supply flexibility to support their business needs in response to evolving demand plans,” a De Beers spokesperson commented.
In the first half of this year, China consumed nearly 555 tons of gold, up more than 16 percent year-on-year. The trend has been described as a domestic gold craze. But diamonds seem to have lost their attraction, as the market size in China declined to 11.4 billion U.S. dollars in 2022, 2.5 billion dollars less than in 2021. Xu Hua has more from the southern Chinese city of Shenzhen, China’s biggest distribution center for wholesale jewelry.
XU HUA Shenzhen Shuibei Jewelry Market “We’re at Shenzhen’s Shuibei Jewelry Market, the biggest wholesale market of its kind in China. The market has been crowded with consumers from all over the country for months, as international gold prices continue to rise. Let’s go and see what the best seller is here.”
The hustle and bustle of the Shuibei Jewelry Market since the beginning of 2023 marked a strong comeback from last year. With attractive designs, diverse styles and low prices, dozens of deals can be reached in seconds.
YU WANLING Shenzhen Resident “Shuibei is well-known for its gold sales. The quality gold is more reassuring than other places.”
ZHENG CE Shenzhen Resident “We are about to get married. We prefer to buy some gold rather than diamonds for inheritance or for wearing.”
China’s domestic consumption of gold jewelry reached 555 tons in the first half of 2023. Among the gold consumption, the purchase of gold bars jumped 30 percent year-on-year to 146 tons, while that of gold jewelry reached 368 tons, up almost 15 percent from the same period last year.
HAO RUNSONG General Manager, Lidu Gold “In 2023, our gold sales increased by 20-30 percent compared with last year.”
By contrast, the doorways of neighboring diamond stores looked relatively lonely, as the precious gems lost some significant value over the last few months.
LIU JINGLI Manager, Yishidai Jewelry “The retail transaction volume of diamond inlays is relatively low, and the wholesale sales of our diamond inlays is also declining.”
ZHAO LI Director, The Gold Plaza Operation Center “The sales of diamond jewelry have declined slightly, partly due to falling prices, fewer marriages, the impact of cultivated diamonds, and changing buyer behaviour.”
For daily social needs, some consumers looked to art jewelry as an alternative to diamond jewelry.
HUANG WEIJUN Brand Director, Shenzhen REIEN Jewelry “Our sales of art jewelry in the first half of this year have increased by about 300 percent over the whole of last year.”
Some economists say the booming gold sales are a direct reflection of a gloomy economic outlook.
WU HAIFENG Executive Director, Shenzhen Institute of Data Economy “When people feel uncertainty about the future, especially on the economy, especially about the income growth, people will think to change their investments platform from a variety of the financial products to hard currencies such as gold, such as real estate.”
However, Wu says that the real estate market hasn’t looked good since the beginning of the last year, so Chinese consumers and investors have been looking at other products. Wu added proper stimulative policies are still needed to ensure a healthy market and economic rebound. Xu Hua, CGTN, Shenzhen, Guangdong Province.
Cryptocurrency mogul Richard Heart allegedly used proceeds from the sale of unregistered securities to buy the 555-carat Enigma diamond, according to the US Securities and Exchange Commission (SEC).
The SEC has charged Heart — who was born Richard Schueler and who created the Hex cryptocurrency token — with selling the securities to raise more than $1 billion from investors. It alleges that Heart and his PulseChain company committed fraud by misappropriating at least $12 million of those funds to purchase luxury items, including sports cars, watches and the diamond.
“Heart called on investors to buy crypto asset securities in offerings that he failed to register,” Eric Werner, director of the SEC’s Fort Worth regional office, said in a statement Monday. “He then defrauded those investors by spending some of their crypto assets on exorbitant luxury goods.”
The Enigma, which is believed to have come from outer space, is the largest faceted diamond of any kind to appear at auction. Heart purchased it from Sotheby’s at a one-off sale in February 2022 for GBP 3.2 million ($4.3 million). At the time, Heart tweeted that he had bought the stone and would rename it the Hex.com diamond as a nod to his cryptocurrency platform, calling it a “match made in heaven.” Hex has a “5555 day club” comprising people who hold 5,555-day Hex stakes — the longest possible stake in the electronic token.
Sotheby’s, which accepted payment for the Enigma, was not mentioned as a defendant in the SEC’s lawsuit.
“Sotheby’s does not comment on individual transactions, but we can confirm we have established due diligence procedures, tailored and updated to take account of our requirements to conduct business in compliance with applicable laws and regulations,” the auction house stated.
Anglo American plc announces the value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ sixth sales cycle of 2023, amounting to US$410 million.
The provisional rough diamond sales figure quoted for Cycle 6 represents the expected sales value for the period 10 and 25 July and remains subject to adjustment based on final completed sales.
Al Cook, CEO of De Beers, said: “In line with seasonal trends, rough diamond sales continued at a lower level during the sixth sales cycle of the year. Participants in the diamond industry’s midstream sector continue to take a cautious approach to purchases in light of ongoing macroeconomic challenges.”
De Beers has sharply decreased its prices for select larger rough diamonds at this week’s sight, as the weak market has shown few signs of recovering.
The price cuts range from 5% to 15% in several categories for stones 0.75 carats and up, with an emphasis on 2-carat diamonds and larger, industry insiders told Rapaport News on Monday. Some of these goods already saw price reductions last month, they noted, while the 15% cuts are in a handful of sluggish categories that the miner left untouched in June.
De Beers has focused its adjustments on the lower-quality items for which demand has been especially slow, the sources said on condition of anonymity. Polished sales in SI to I2 clarities have slumped this year due to the overall weakness of US retail — the main market for this range — as well as competition from lab-grown diamonds.
The company also maintained its policy of allowing 30% buybacks for certain low-performing items, the industry sources said. Buybacks let sightholders sell a proportion of the rough they’ve purchased back to De Beers, allowing them to offload the stones that will generate the least profit. The limit is usually 10%.
De Beers declined to comment on the price changes.
The July sight — the sixth of the year — began Monday and runs through Friday in Gaborone, Botswana. It is the first sight since De Beers and the Botswana government announced a new 25-year mining license and a 10-year sales agreement that will see state-owned Okavango Diamond Company (ODC) gain access to 50% of the country’s rough over the course of 10 years.
The June session saw sales fall 32% year on year to $450 million after De Beers slashed prices of many categories above 1 carat. The negative trends that were present then have continued into July, with the seasonal US summer slowdown compounding the situation. Many manufacturers in India have lowered their polished production to around 50% capacity in response to low sales and tight margins. They have shifted to smaller, lower-value rough to keep factories running.
However, even a 15% price drop for rough is not enough to solve the problem, one executive at a sightholder company said Monday. “[Polished] prices have fallen more than that over the last couple of months. More importantly, there’s still no [foreseeable prospect] of sales. We are all still waiting for the US to wake up.”
