Diamond market weakness prompts giant De Beers to curb supply

De Beers, the world’s biggest diamond miner by value, is scaling back production plans for this year as it tries adjusting to a brewing industry crisis that’s hitting prices and demand for precious stones.

The Anglo American’s unit said a range of factors, including ongoing trade tensions between the United States and China, contributed to a 27% drop in earnings during the first half of the year.

Polished diamond demand, and midstream rough diamond demand, was impacted on by retail store closures and destocking in the US, the world’s biggest market for diamonds, De Beers said.

Elsewhere, sales were impacted on by the trade tensions, protests in Hong Kong and a stronger US dollar, which particularly affected China and the Gulf.

De Beers said it expected the impacts of ongoing challenges to be short term and predicted a healthier industry outlook over the long term.

The company, once the monopoly supplier of precious stones, has been combating increasing competition from laboratory-made diamonds by producing its own at a lower cost than peers.

Cheaper diamonds, which are often small and low quality, are selling for less now than six years ago. And when it comes to synthetic stones, De Beers’ entry in the market is creating a big price gap between mined and lab diamonds, pressuring rivals that specialize in synthesized stones at the same time.

A 1-carat man-made diamond sells for about $4,000 and a similar natural diamond fetches roughly $8,000. De Beers new lab diamonds will sell for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem.

The move has put pressure on polished prices, hurting the margins for De Beers’s customers who cut, polish and trade the company’s diamonds.

The company, with operations from Botswana to Canada, is far from turning its back to mined diamonds. It recently announced a $468 million investment in a new vessel to extract precious rocks off the coast of Namibia.

While marine diamonds may be challenging to find, they’re certainly worth the effort. According to the company’s own estimates, 95% of the precious rocks recovered from the sea are of “gem quality,” compared to just 40-60% of those mined inland.

from MINING.COM https://ift.tt/2Y0heEi