Tag: DeBeers

On Monday, De Beers’ customers turned up at the first day of the miner’s January sight to find rough prices were down by an average of 10% to 15%. The reductions were more drastic than many had predicted.

The drops ranged from slight adjustments for the more in-demand smalls, all the way to an estimated 20% to 25% cut for 2- to 4-carat, lower-clarity rough, sources said.

Sightholders usually celebrate a price decrease, since their margins can be thin at the best of times. But, immediately, the industry started asking the obvious question: Will this cause polished prices to fall?

The basic assumption is that cheaper raw materials mean cheaper end products. Yet the situation with diamonds is more complicated.

First, there are different ways of pricing polished. You can sell based on the current cost of replacing the goods — a method that would imply polished prices should fall, since De Beers rough is now cheaper. However, it’s also possible to price according to the input cost, with the vendor aiming for a certain profit based on how much the rough actually cost. This would, in theory, mean the latest drop in rough prices would not impact polished until around March, when the new, cheaper material enters the market as polished.

Still, most sightholders that spoke to Rapaport News this week don’t expect polished prices to suffer — though the people who buy their polished might disagree. The miner’s move, sightholders argue, was merely an adjustment to polished-price levels and to the price of rough at open tenders and auctions.

De Beers had priced its goods some 15% higher than the rest of the rough market, as it chose to sell less volume since August rather than discounting during the market slump. Its last significant price decrease before this was in July 2023. Since the start of that month, the RapNet Diamond Index (RAPI™) for 1-carat diamonds has fallen 12.5%.

Price drops at De Beers are not always in sync with the market. In recent years, the company has held off reducing prices until crises have eased, as it did in 2020 following the first round of Covid-19 lockdowns. De Beers sold just $216 million in rough at its last two trading sessions of 2023 as it followed this policy amid weak demand.

But the company needs revenue after incurring a loss in the second half of last year. It appears to have chosen the market improvement as an opportune time to stimulate sales.

“In the final quarter of 2023, we saw some stabilization in polished prices, including a number of areas of natural polished now starting to see some price increases,” a De Beers spokesperson said in a statement Wednesday. “Following this stabilization, we have realigned our rough-diamond trading activities, in terms of prices, volumes and supply flexibility, to reflect prevailing industry conditions.”

With the market in flux, De Beers also showed sightholders sample assortments of rough diamonds that indicated the types of goods and prices customers can expect for this year. Based on these so-called “to see” boxes, sightholders were able to apply for additional goods if their need for rough has increased since they submitted their supply applications in mid-December, the spokesperson explained.

However, market participants expect total sales at the sight of $300 million to $400 million — low for January, which is usually a time of post-holiday restocking. The recent season in the US was okay, but Chinese demand remains slow.

Whether sightholders maintain this cautious approach — and De Beers doesn’t sell too much — will be crucial. Excessive buying could lead to a repeat of last year’s oversupply, which ended with India’s two-month voluntary freeze on rough imports. During the recent crisis, De Beers continued selling — albeit at lower volumes — even when competitor Alrosa canceled sales.

At the January sight, De Beers also removed the extra concessions that had allowed sightholders to refuse goods in the final sights of last year without being penalized. The end of this flexibility increases the danger that goods will flood the market and that manufacturers will sell polished cheap to increase cash flow and raise money for rough.

The fact that De Beers diamonds remain relatively expensive could itself support polished prices, since sightholders have no room to offer further discounts.

“There’s no hooray if you look at those prices,” said one sightholder, noting that even the new rates will probably enable businesses to break even rather than turn a significant profit. “It’s just aligning with [reality]. It’s not like you’re going to make 10% [profit].”

Another sightholder agreed the reductions didn’t go far enough — but believed it would likely be up to the trade to drum up polished demand rather than expect further cuts to rough prices.

“If anybody thinks this is a price reduction — no, it’s a halfway correction, and not even achieving the final goal,” he asserted. “But I also believe they won’t do much [in terms of price cuts] after this. I think their expectation is: ‘Listen, we got you 60% of the way. The other 40%, you guys have to jump up now.’”

Source: Diamonds.net

De Beers reduced rough-diamond prices by an average of 10% to 15% at this week’s sight, aiming to stimulate sales and bring its rates more in line with the rest of the market, sources told Rapaport News.

The miner lowered prices by 5% to 10% for rough under 0.75 carats, with thinner or no reductions for the smallest items that produce melee, sightholders and other market insiders said Monday on condition of anonymity.

Rough weighing 0.75 to 2 carats saw reductions of approximately 10% to 15% on average, while prices of 2-carat and larger goods dropped about 15%, the sources added.

Select makeables — the 2- to 4-carat rough stones that produce SI2 to I2 diamonds — fell more sharply, with estimates ranging from 20% to 25%. This reflects the impact of lab-grown competition on mid-market US demand in the past year, sightholders explained. De Beers does not comment on pricing.

De Beers tends to sell less volume during a downturn and reduce prices only once the polished market has improved. The RapNet Diamond Index (RAPI™) for 1-carat diamonds slid 21% in 2023, the worst year on record for the category, but sightholders reported a moderate uptick in US demand since the holiday shopping season began, though Chinese orders remain weak.

The global market also stabilized as a result of India’s two-month voluntary freeze on rough imports, which ended December 15.

“[In the past, De Beers] didn’t want to change prices because they didn’t know [what the state of the] polished [market] was,” one of the sources commented. “They have an idea where polished is now, and have adjusted rough to polished.”

However, several sightholders said the drops did not go far enough, with De Beers’ prices still above those of outside tenders and auctions and also too high for many manufacturers to make a profit.

Even with the price reduction, the sources expected demand at the sight to be limited, with sales of around $300 million. The trading session, De Beers’ first of the year, began Monday and runs through Friday in Gaborone, Botswana.

Source: Diamonds.net

Global diamond giant De Beers said it will go ahead with a planned $1 billion investment to extend the life of its flagship Jwaneng mine in Botswana, even as last year’s downturn in gem demand persists.

The Anglo American (AAL.L) unit and the Botswana government, which jointly own Debswana Diamond Company, have approved the spending that will convert the Jwaneng pit into an underground operation.

Debswana said in 2018 it planned an investment to extend the lifespan of the mine by 11 years from 2024. De Beers said the spending is necessary as long-term supply of rough gems is expected to tighten.

Angola last year started mining at its new Luele project, the biggest in the country and one of the world’s largest by estimated resources, despite depressed diamond demand.

“The global supply of natural diamonds is falling, so moving forward with the Jwaneng underground project creates new value for investors,” De Beers CEO Al Cook said.

Demand for rough diamonds has been weak in recent months with India – cutter and polisher of 90% of the world’s rough diamonds – asking global miners to stop selling it gemstones to manage accumulated stocks.

“This investment is aligned with our strategy to prioritise investments in the highest quality projects,” Cook said.

De Beers last year agreed a new diamond sales pact, which will see the government’s share of diamonds from the Debswana joint venture gradually increase to 50% over the next decade.

Source: Reuters

Bruce Cleaver will leave his role as cochair of De Beers’ board of directors and will also relinquish his position on the board of the miner’s lab-grown diamond-manufacturing company, Element Six.

The move follows Cleaver’s exit as CEO in early 2023 after six years in the position. Cleaver’s appointment to the boards was to enable a smooth transition of leadership to his replacement, Al Cook, a De Beers spokesperson told Rapaport News.

Additionally, while on the board, “Bruce also supported the finalization of the commercial negotiations with the government of the Republic of Botswana,” the spokesperson said. “With the leadership transition complete, and with De Beers and Botswana having signed heads of terms for the new agreements, Bruce has delivered on those objectives, and so has stepped down from the board of directors.”

Cleaver will remain with De Beers in an advisory capacity, the spokesperson added. Duncan Wanblad, CEO of De Beers parent company Anglo American, will now be sole chair of the miner’s board of directors.

Source: Diamonds.net

When the world’s most important diamond buyers arrived at De Beers’ offices in Botswana late last month, they were presented with a rare offer by their host: the option to buy nothing at all.

De Beers markets its rough diamonds in a series of tightly scripted sales, where handpicked buyers are normally expected to take all their contracted allocations at a price set by De Beers, or face potential penalties in the future. But with prices in free fall around the world, the one-time diamond monopoly has been forced to allow more and more flexibility, finally removing the restrictions altogether.

The concessions are the latest in a series of increasingly desperate moves across the industry to stem this year’s plunge in diamond prices, after slowing consumer demand left buyers stuck with swelling inventories. De Beers’s great rival, Russian miner Alrosa PJSC, already canceled all its sales for two months, while the market in India — the dominant cutting and trading center — had self imposed a halt on imports.

At the recent De Beers sale, its buyers, mostly from India and Antwerp, seized on the unusual flexibility, between them buying just $80 million of uncut gems. Normally De Beers would have expected to shift between $400 million and $500 million at such a sale. Outside of the early days of the pandemic — when sales were halted altogether — the company has not sold so few gems since it started making the results public in 2016.

The speed and severity of the collapse in diamond prices caught many by surprise.

The industry had been one of the great winners of the global pandemic, as stuck-at-home shoppers turned to diamond jewelery and other luxury purchases. But as economies opened up, demand quickly cooled, leaving many in the trade holding too much stock that they’d bought for too much money.

What looked like a cool down quickly turned into a plunge. The US economy, by far the industry’s most important market, wobbled under rising inflationary pressure, while key growth market China was hit by a real estate crisis that sapped consumer confidence. To make things worse, the insurgent lab-grown diamond industry started making major gains in a couple of key segments.

While there are many different diamond categories, broadly prices for wholesale polished diamonds have tumbled about 20% this year, firing a more dramatic fall in rough — or uncut — stones that have plunged as much as 35%, with the steepest declines happening though late summer and early autumn.

The industry’s response was to choke off supply in an almost unprecedented way, which finally seems to be working.

Prices at some smaller tender sales and auctions have risen between 5% and 10% in the past week as shortages of some stones start to emerge. With Indian factories set to reopen next month after prolonged Diwali closures, there is now renewed confidence that the worst has passed.

“The diamond industry has successfully taken action to stabilize things,” said Anish Aggarwal, a partner at specialist diamond advisory firm Gemdax. “That now creates a window to rebuild confidence.”

The plunge in diamond prices has coincided with weakness across the luxury space. LVMH Moet Hennessy Louis Vuitton SE, the luxury titan with 75 labels ranging from Christian Dior to Bulgari, has disappointed investors this year as China’s recovery underwhelmed and demand from US consumers cooled, with the stock shedding more than $100 billion in value since mid April. On Friday, Cartier owner Richemont reported a surprise decline in earnings as revenue from luxury watches unexpectedly fell and high-end consumers reined in spending.

Yet there are specific peculiarities to the diamond industry that make it more vulnerable to slowing consumer demand. De Beers sells its gems through 10 sales each year in which the buyers — known as sightholders — generally have to accept the price and the quantities offered.

When prices are rising, as they did for much of the past two years, these buyers are often incentivized to speculate, betting that paying for unprofitable stones now will pay off if prices continue to rise. Buyers are also rewarded for making big purchases by being given bigger allotments in the future, known in the industry as “buying for position.”

These mechanisms often lead to speculative bubbles, which pop when consumer demand slows and polished diamond inventories build up.

In response, Alrosa stopped selling diamonds altogether for two months, while the Indian diamond sector introduced a halt on imports that will run to mid December. De Beers has allowed its customers to refuse all purchases without it having any impact on the future allocations for its last two sales of the year.

While the two dominant diamond miners have a long history of curtailing supply or letting buyers refuse some goods when demand weakens, the speed and scale of the combined actions is extremely unusual outside of a major crisis such as the outbreak of the pandemic.

While prices have stopped falling — and in some areas rising again — much will depend on the crucial holiday season, which spans from Thanksgiving to Chinese New Year, and how the big miners who have accumulated large stocks of unsold gems feed them back into the market.

There also remains uncertainty in the industry about how much of the slowdown is being driven by macro-economic weakness, versus a more worrying shift in consumer choices. Lab-grown diamonds have made rapid progress in some key segments of the market, while there are lingering concerns in the industry about whether Gen Z consumers look at diamonds the same way as previous generations do.

“We expect there to be some cyclical recovery in the diamond markets,” said Christopher LaFemina, an analyst at Jefferies. “But we believe there are also structural issues here that could lead to weaker than expected demand for the longer term.”

Thomas Biesheuvel mining.com