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De Beers sales drop in weak rough market

De Beers’ sales slumped to $295 million in September as the miner continued to allow sightholders to refuse goods in the prevailing weak rough-diamond market.

The company maintained firm prices and offered increased flexibility to encourage lower purchases, thereby reducing the oversupply in the polished sector, sightholders explained to It continued its policy of allowing clients to reject 50% of their allocations. It also expanded its buyback program by enabling customers to sell back to De Beers up to 30% of goods in the 2- to 10-carat rough categories, and 20% of the smaller items that constitute the majority of its supply.

“[De Beers] wants the market to recover before bringing more goods to the market,” an India-based sightholder noted. “They know if they try to push more goods into the market it will take more time to recover.”

Proceeds from the eighth sales cycle of the year were higher than the $287 million it recorded in August, but fell 39% below the $482 million the company garnered a year ago, De Beers reported Thursday. The midstream is still struggling with a surplus of goods amid weak polished sales, aggravated by social unrest in Hong Kong, which hampered a recovery in Far East demand, an Antwerp-based sightholder explained.

“[De Beers] had this scenario in mind, which started in July, that they would not change prices, and would restrict the volume that goes to the market,” the sightholder observed. “People are picking out the items which are relatively OK, but there’s no big appetite for the goods.” The pipeline still contains too much polished, with sellers struggling to offload inventory because competitors are significantly lowering prices, the sightholder added.

The September sight is traditionally a smaller sale as diamond manufacturing slows ahead of India’s Diwali festival, when factories close for around three weeks. Indian manufacturers are demonstrating some demand for rough so they can resume operations after the festival, which this year begins on October 27.

“As we approach what is traditionally a quieter time of year for the diamond industry during the Diwali holiday, we have again offered our customers flexibility during this sales cycle,” De Beers CEO Bruce Cleaver said in a statement.

Meanwhile, sightholders have one eye on the upcoming reassessment of their allocations for the 2020 sales session, known as an intention-to-offer (ITO) period, which De Beers determines based on their purchases during the current ITO, sources added. The company is shifting to a calendar-year ITO period from January, replacing the previous April-to-March system. As a result, the review of supply will take place before the end of 2019, rather than during the first quarter.

De Beers’ rough sales have fallen 27% year on year to $3.21 billion in the first eight sights, according to Rapaport records. The next sight will take place from November 4 to 8.

Courtesy - Rapaport

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