De Beers diamond sales drop dramatically in second cycle of 2020

DE BEERS, the world’s third-largest producer of rough diamonds, yesterday reported a 28 percent year-on-year knock in sales during its second sales cycle of 2020 as the coronavirus hurt its Chinese market.

De Beers, a subsidiary of global mining giant Anglo American plc, reported $355 million (R5.48 billion) in rough diamond sales in the second sales cycle, down from $496m a year earlier, and $551m in the first sales cycle in 2020.

Chief executive Bruce Cleaver said the group felt the impact of the coronavirus just as the company was on a recovery trajectory following a slump in demand last year.

“Following an improvement in demand for rough diamonds during the first sales cycle of 2020, we recognised the impact of Covid-19 coronavirus on customers focused on supplying the Chinese market and put in place additional targeted flexibility to enable customers to defer allocations of the relevant rough diamonds,” said Cleaver.

The coronavirus has sent shockwaves across the market and has led to speculation that the global economy could be pushed into a recession.

Seleho Tsasti said De Beers had been under pressure since 2018.

‘“Coronavirus was flagged as impacting the demand in the announcement, although it is important to note that De Beers has struggled with weak pricing for over a year now. Year-to-date, De Beers’ rough diamond sales values are 8 percent down. 2019 was De Beers’ worst year when measured by absolute underlying earnings before interest, and taxes since 2009,” Tsatsi said.

De Beers, which holds 12 sales cycles a year for its rough diamonds, last month said that sales fell 8 percent during the 2019 full year to 30.9 million carats compared with 33.7 million carats in 2018.

The lower sales volumes were against the backdrop of the low price environment which has seen prices below $250 a carat since 2018.

According to the Rapaport Research Report, which studies trends in the diamond industry, diamond trading declined sharply in February due to economic uncertainty surrounding the coronavirus.

The report said that manufacturers and dealers were facing a severe liquidity crunch, as sales to China and Hong Kong had stopped.

The report said the Chinese downturn would have a broad impact on the industry, as major trade shows in Hong Kong and Basel, Switzerland, had been cancelled and buyer traffic in the bourses had declined.

“With Chinese retail at a standstill, the slump in jewellery sales means stores have more inventory for this time of year. Chinese buyers are not expected to return to the market in the coming months,” said the report.