DE BEERS has reduced the number of sightholders able to buy from it by about 10 and refined how it sells rough diamonds to others as part of the biggest shakeups in the way it sells gems since the end of its monopoly 20 years ago, said Bloomberg News.
Citing people familiar with the changes, the newswire said that the aim of the shakeup was to funnel more stones into fewer hands. This would enable buyers to specialise in certain types of stone, providing them with more pricing power and enabling them to be more resilient through market cycles, said Bloomberg News.
The industry produces about 15,000 different categories of diamonds which are sold to a range of buyers from Indian and Israeli family-run businesses to large jewellers such as Tiffany & Co, said Bloomberg News.
Some sightholders – designated cutters, manufacturers and traders permitted to buy exclusively from De Beers – have lost their status entirely. Bloomberg News cited sources saying sightholders would number about 70 following the restructure.
Other sightholders have been downgraded from being international buyers, who can manufacture in places like India where they have a cost advantage, to local buyers. The latter can only manufacture in countries where the diamonds are mined, such as South Africa and Botswana, the newswire said.
The Covid-19 pandemic worsened the impact of an existing dip in the diamond market and highlighted the problems the so-called ‘midstream’, the cutters and polishers, were experiencing. There was also a contraction in the availability of credit to the midstream which exacerbated the sector’s difficulties.
Towards the end of last year, there had been a gradual improvement in diamond demand as consumers returned to the high street. But Anglo American, which owns 85% of De Beers, said it would treat any recovery tentatively.
“We are being prudent in our forecasts and we are certainly not going to be a contributor to overstocking in the industry”, said Mark Cutifani, CEO of Anglo American, in December.
Anglo has maintained its production forecast for the current 2020 financial year at 26 million carats, but has cut 2021 to between 33m and 35m carats (previous estimate 34m to 36m carats), and also reduced the 2022 estimate to between 30m and 33m carats (33m to 35m carats). The newly published estimate for 2023 is 30m to 33m carats.
Cutifani said the optimistic market outlook was based on a reduction in rough diamond supply as well as a recovery in demand from the diamond trade following sharp de-stocking of diamonds from the retail pipeline during 2018 and 2019 in the US in particular.