De Beers warns diamond price recovery to take “some time”

A model holds a De Beers cushion brilliant-cut fancy vivid blue 5.53 carats diamond that could fetch 15 million US dollars during a press preview by Sotheby's auction house ahead of sale in Geneva on November 3, 2022. - The stone is part of eight rare Fancy Blue diamonds to be sold across its jewels auctions this year in New York, Geneva, and Hong Kong and throughout the Spring of 2023. (Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)

A RECOVERY in the diamond market would “take time”, said Al Cook, CEO of De Beers which on Wednesday announced first cycle sales of $370m – 18.5% less than the $420m in first cycle sales last year.

Cook said “solid” consumer demand in the US over the year-end holiday season had “helped stabilise” the diamond industry which had resulted in polished prices increasing again. “Combined with the restart of rough diamond imports into India, this had led to demand for rough diamonds increasing substantially in the first sales cycle of 2024.”

But he warned that the prospects for economic growth in major economies “remain uncertain” adding that “we expect that it may take some time for rough diamond demand to fully recover”.

The diamond market slumped in the second half of last year which would result in De Beers losing money, according to Anglo American, the 85% shareholder in the diamond miner and marketer. For the final cycle of the year, De Beers reported sales of $137m. It retained rough diamonds to enable the mid-stream of polishers and cutters to clear inventory.

A similar effort to stem supply was launched by India’s Gem & Jewellery Export Promotion Council. It teamed up with various local diamond polishing associations to introduce a voluntary two-month freeze on rough diamond imports aimed at reducing inventory levels. Russia’s Alrosa temporarily suspended sales of rough diamonds for September and October, due to subdued demand.

In January, Petra Diamonds CEO Richard Duffy said Petra was seeing “encouraging indications of price recovery and some stabilisation in the rough diamond market following actions taken by both producers and the mid-stream.”

But he added “we continue to adopt a cautious approach to the market in the near-term. Once completed, the additional headroom afforded by our increased revolving credit facility will enable us to continue our flexible sales approach and position ourselves to take advantage of any market improvements”.

Morgan Stanley analysts said in a report last year that the beginning of a supply rebalancing that emerged among major producers last year “will likely take time”. But on a long-term basis, miners think a supply deficit will emerge.

Global rough diamond production is unlikely to return fully to pre-Covid levels in carat volume, owing partly to the closure in 2020 of Rio Tinto’s Argyle mine, analysts say. About 10-million carats of production a year was removed from the industry, accounting for 10% of global production volumes in 2020.