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Home » News » Business » De Beers sales at $665-million

De Beers sales at $665-million

Publishing Date : 05 February, 2018

Author : AUBREY LUTE

De Beers Group rough diamond sales (Global Sightholder Sales and Auction Sales) for the first sales cycle of 2018 has been provisionally capped at $665-million.

Diamond miner De Beers achieved an “encouraging” sales performance in the first sales cycle of this year, with industry restocking contributing to increased demand for rough diamonds. The $665-million worth of  diamonds in the sales cycle is an improvement compared with sales of $445-million in the tenth cycle of 2017. But the De Beers’ first sales cycle of 2018 does not compare positively to the same period last year - with $729 million over the same period last year, it was a far much better performance by De Beers.


Bruce Cleaver, CEO, De Beers Group, said: “Following positive early signs for diamond jewellery sales over the holiday season in the US, the need for the industry to restock led to increasing demand for our rough diamonds in the first sales cycle of 2018. This seasonal restocking demand does usually see a larger share of annual purchases being planned into the first sales cycle of the year by our customers, resulting in an encouraging sales performance.”


Cleaver had an explanation for the contrast with the corresponding period from last year, “In the equivalent sales cycle last year, sales levels benefitted from purchases that had been deferred from late in 2016 as a result of the initial impact at that time of India’s demonetisation programme.”


The U.S. is still by far the largest end-consumer market for diamonds at about 50%. Greater China, which includes Mainland China, Hong Kong, Macau and Taiwan, and India represent the industry’s fastest growing large markets. Global diamond supply is estimated to marginally decrease about 1.5% in 2018 to 146M carats and global polished diamond wholesale demand is estimated to hit $26.6B in 2018, which would be a 3.8% increase over 2017.


Paul Zimnisky in his 2018 global diamond industry primer write up notes that 2017 has been a year of excess inventory shifting from the upstream segment of the diamond industry to the mid-stream segment. For instance, industry leaders De Beers and ALROSA have both see their inventories decrease by an estimated 1.6M and 2.3M carats, respectively, though Q3 2017, this despite both producers also increasing production this year.


“World-wide natural diamond production is estimated to rise to approximately 148M carats in 2017 which would be a 7% increase in volume over last year. The increase mostly due to the commencement of production at three new mines, the ramping-up of production at previously curtailed operations and expansion projects at legacy mines,” he says.


Zimnisky further notes that through mid-December 2017, rough diamond prices are up 2.7%* year-to-date, while polished prices are down 3.5%**. However, despite shrinking manufacturer margins, the midstream segment of the industry still bought $5.3B worth of diamonds from De Beers this year, including $450M at the final sight which was 7% over the comparable sight last year and 81% over 2015.


“De Beers’ full-year sales were -5% relative to last year and +53% over 2015. Russian-major, ALROSA, is on pace to sell $4.4B of diamonds in 2017, which would be in line with 2016 and 27% over 2015.” The U.S. consumer market is currently supported by a relatively strong economy. With the stock market regularly making new all-time highs and with most employment figures at favorable levels, consumer sentiment is positive. Pending tax reform and the recent appointment of a new Fed chairman that favors continued dovish policy has supported this trend.


Most industry participants would agree that the first half of 2017 was strong, however, the second half relatively disappointing. Demand for rough returned aggressively in early-2017 as manufacturers in India recovered from the late-2016 liquidity crisis caused by the government’s demonetization of high demonization bank notes.


However, by mid-year, new polished entering the market compounded an already overstocked global polished inventory and manufacturers noticeably pulled back operating activity punctuated with longer-than usual Diwali factory closures in the fall.
With rough diamond sales hitting ups and downs, there are future challenges that could also lower demand. For instance the Diamond Producers Association, established by the diamond industry to return genetic marketing to diamonds, could impact consumer demand following the launch of a second U.S. campaign and first Indian campaign in November 2017 and first Chinese campaign in April 2018.


In addition the Five Star Diamonds plans to continue progressing exploration and development on over 20 kimberlite projects in Brazil in 2018, which could lead to Brazil eventually becoming a more important contributor to global diamond supply.
Meanwhile a U.S.-based lab-created diamond producer, Diamond Foundry (private), plans to build a “MegaCarat foundry” in Washington state, with first reactors expected to be deployed by Q2 2018, which would add to the company’s current annual production estimated at approximately 100k carats.

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