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De Beers Cuts Diamond Prices by About 5 Percent as Industry Crisis Deepens

De Beers Cuts Diamond Prices by About 5 Percent as Industry Crisis Deepens
(Bjorn Wylezich/Dreamstime)

Monday, 04 November 2019 01:03 PM

De Beers is taking more drastic steps to stem the crisis in the diamond industry by cutting prices across the board for the first time in years.

The company, the world’s biggest diamond producer, lowered prices by about 5% at its November sale, according to people familiar with the matter, who asked not to be identified as the information is private. The move is designed to alleviate pressure on De Beers’s customers, who are getting squeezed by shrinking profit margins.

De Beers sells most of its rough diamonds to a select number of customers -- a group largely comprised of family-run traders in Belgium, Israel and India, but also includes the subsidiaries of Tiffany & Co. and Graff Diamonds. In the diamond trading world, becoming one of the elite buyers used to be essential to making money, but now many of them are struggling.

The issues in the diamond industry are centered around an oversupply of polished gems, which has depressed prices. Much of the polishing and trading industry is based in India, where companies have been hurt by tight bank financing and currency fluctuations.

The current crisis already prompted De Beers to offer near-unprecedented flexibility to buyers, but until now it has held relatively firm on maintaining prices. Customers have grown increasingly frustrated as a slump in polished-diamond prices meant that profit margins on trading diamonds turned wafer thin or disappeared altogether.

De Beers holds 10 sales events each year in Botswana, where its chosen buyers --- known in the industry as sightholders -- are given a box containing plastic bags filled with diamonds. De Beers made less than $300 million in each of the past three sales, which is the lowest in data going back to 2016.

The company is expected to publish the results of the November sale next week.

The company sold just $295 million of diamonds in its eighth sale of the year, 39% less than a year earlier, it said Oct. 3. Its sales so far this year are more than $1 billion lower than a year ago.

Still, De Beers has insisted that the current weakness doesn’t mean demand has softened for the diamonds it mines and sells. Last week, the company released data that showed demand for diamond jewelry rose 2.4% last year, while the crucial U.S. market, where almost half of all diamonds are sold, increased 4.5%.

Anglo American Plc, which owns De Beers, closed up 1.8% at 2,080 pence in London on Monday.

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De Beers is taking more drastic steps to stem the crisis in the diamond industry by cutting prices across the board for the first time in years.
debeers, diamond, prices, crisis
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2019-03-04
Monday, 04 November 2019 01:03 PM
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