According to report, De Beers, the largest source of rough diamonds by value, reported the
lowest level of rough diamond sales for February since it started
releasing the data in 2016, achieving $490m.
De Beers, which is 85% owned by Anglo American, has 10 sales events a
year, including the allocation of
specific diamonds to about 80
hand-selected clients at events called sights in Gaborone, as well as
auctions.
The $490m realised in the second sale of 2019 was a continuation of
the weak start to the year, with the first sale of the year of $500m
similarly falling far short of earlier sales. Sales revenue in the
second sales event since 2016 have realised $617m, $553m and $563m,
respectively, in the three years since then.
It’s the first time since De Beers started releasing data on
its 10 sales that revenue is below $1bn in the first two events of the
year.
“Demand for rough diamonds remains 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,” De Beers CEO Bruce Cleaver said.
In the 2018 Anglo American annual report, Cleaver clearly flagged the
difficulties in the lower-value diamond segment of the market. “In the
second half [of 2018], the low-priced product segment came under
considerable pressure due to weak demand and surplus availability, the
rapid depreciation of the rupee and a reduction in bank financing in the
midstream,” Cleaver said.
The midstream segment of the diamond industry is the cutting and
polishing business. These businesses need cash to buy rough diamonds,
pay for working costs — and wait for payment from jewellery retailers
who have increasingly moved to a model of paying for diamonds once
they’re sold. “This resulted in a surplus of low-priced polished
diamonds at the end of the year, leading to lower sales at the start of
2019,” Cleaver said in the report.
Russia’s Alrosa, the world’s largest diamond producer by number of
carats, reported a 44% year-on-year decline in sales in January of
$282m, of which $278m was from rough diamonds with the balance coming
from polished diamonds.
Alrosa reported full-year 2018 sales of 38-million carats, an 8% fall, while revenue was $4.5bn, a 6% drop.
In 2018, De Beers had full-year production of 35.3-million carats, up
6% year-on-year, which, according to the data released during the
course of 2018, realised revenue of $5.39bn, up from the $5.31bn the
year before.
Production from De Beers was the highest in at least four years, with
the new Gahcho Kué mine in Canada reaching full production and, in
part, adding to difficulties in the global diamond market because of its
high levels of small, lower-value diamonds.
The pending closure in the next couple of years of the Argyle mine in
Australia, a major source of small diamonds, is expected to restore the
balance of these diamonds in the market.
- BusinessDay SA
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