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Rough diamond demand shows slow recovery

Publishing Date : 18 November, 2019

Author : ALFRED MASOKOLA

Global diamond mining giants De Beers Group continued to offer its sight holder’s further flexibility during its sales cycle 9, a statement from the De Beers parent company Anglo American reveals.  


According to the communiqué from the London headquartered PLC rough diamond sales at De Beers Global Sight holder Sales and Auctions amounted to $390 million. This mirrors a significant pick up from Cycle 8 figure of $297 million. However when gauged against 2018 cycle 9 the sales value depicts 29 %  decline when compared to $442 million registered in the same cycle last year.


Commenting on the Cycle sales outcome Chief Executive Officer of De Beers Group Bruce Cleaver said the global market on polished diamonds demand was showing signs of slight improvement “With signs of increasing polished price stability, Cycle 9 saw an improvement in sentiment from rough diamond buyers,” he said.


Bruce  further explained that global consumer demand for diamond jewellery at the retail level continues to be broadly stable but, with midstream trading conditions still in the process of rebalancing. “We continued to offer Sight holders further flexibility during the Sight to provide support,” he said. The global rough diamond market has been subdued in the larger part of 2019 with sales figures reaching record low levels in June. For its eighth sales cycle of 2019 De Beers recorded another low turn up mirroring slow sales for the third time in a row as global rough diamond market downturn persisted.


The sale of the rough diamonds which is happening mainly in Gaborone at the De Beers Global Sight holder Sales (DBGSS) as well  small Auction Sales in South Africa and Namibia amounted to an actual figure of  $297 million for Cycle 8. Though a slight pick up from $287 million recorded in cycle 7 this was 38.7 5% lower than the actual sales figure of the same cycle in 2018.  Last year cycle 8 hit actual sales value of $482 million.


De Beers’ rough diamond sales were also very slow in August (cycle 7) the provisional revenues at the seventh sight of 2019 totaled to $280 million. This was significantly lower than the $503 million sold at Sight 7 2018 by 44 %. Cycle 6 was also low; it registered the lowest amount earned from a sale since December 2015 at $250 million.


As with the previous sights, De Beers continued to give its clients the opportunity to leave up to 50% of available goods on the table to lower the pressure on buyers without lowering their prices. As announced in an internal communiqué to sight holders in August  De Beers said it would also buy back up to 20% by carat weight of customers’ purchases instead of the typical 10%, specifying that they could not use both options on the same box of goods.


The company is offering several options to increase the flexibility for manufacturers and traders struggling with an oversupply of rough and polished: in addition to the higher level of buybacks - whereby customers purchase the diamonds and then sell them back to De Beers at an agreed price, while having those purchases count toward their 'demonstrated demand' which determines future allocations. De Beers also enabled buyers to make additional deferrals of goods to later sights, and set an earlier date on the annual opportunity for customers to reschedule their purchases.  


When commenting in August after cycle seven Bruce Cleaver said, “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.” 


Diamond Industry experts note that the market requires this flexibility approach. David Harari, a  renowned rough diamond trader says particularly with De Beers keeping prices stable, clients are trying to buy as little rough as possible as they wait for polished demand to pick up. Harai observes that buyers wish to avoid producing expensive rough and being stuck with goods that polished buyers don’t want.


"The remedy at the moment is for rough producers to cut production and sales to reduce the surplus of goods in the pipeline ,of course, clients want cheap rough so they can make some profit in manufacturing or trading, but even that is not possible at the moment,"  he  said.
De Beers decreased its rough diamond production in Q2 by 14% to 7.7 million carats and revised its full-year guidance downwards to 31 million carats in response to a backlog of polished diamond inventories in the midstream and weaker trading conditions.

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