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De Beers Group has amassed its largest inventory of diamonds since the 2008 financial crisis, underscoring the group’s challenge to revive demand for the gemstone, long considered the pinnacle of luxury goods.
The world’s largest diamond producer by revenue is sitting on about $2 billion worth of inventories as weak Chinese demand, increased competition from lab-grown alternatives and pandemic lockdowns reduce the number of marriages. It happened.
The size of the stockpile, which has not been previously reported, has hovered around $2 billion for most of this year, the company said.
“This has been a bad year for rough diamond sales,” CEO Al Cook said.
A prolonged decline in demand caused by the coronavirus pandemic has forced De Beers to take steps to curb the supply of precious stones. The company has cut production from its mines by about 20% from last year’s levels and lowered prices at its most recent auction this month.
Auctions are used to sell rough or uncut diamonds to a group of about 50 authorized buyers known as sightholders, the most powerful dealers in the industry.
With a 20,000-strong workforce, De Beers has dominated the $80 billion diamond jewelry market since its founding in the late 19th century. The group’s revenue fell to $2.2 billion in the first half of this year from $2.8 billion in the same period in 2023.
Its biggest rival, Russia’s Alrosa, was hit by G7 sanctions on Russian diamonds this year following the country’s full-scale invasion of Ukraine in 2022.
The diamond market’s woes come as De Beers is set to be spun off into a separate company by owner Anglo American. The FTSE 100 mining group pledged to sell De Beers this year after fending off a £39bn takeover bid from rival BHP.
Anglo CEO Duncan Wanblad warned that disposing of De Beers, either through a sale or an initial public offering, could be complicated by the downturn in the diamond market.
To boost sales, De Beers launched a marketing campaign focused on “natural diamonds” in October, recreating a famous advertising campaign from the late 20th century.
Mr Cook, who will lead De Beers from February 2023, said he would increase investment in advertising and retail, including expanding its store network from the current 40 to 100 stores worldwide, as the group prepares to separate. Ta.
“It’s the resumption of this big campaign of category marketing. . . . I think this is a very early indicator of what an independent De Beers will be like,” Cook added.
“Now that we are independent, we are free to focus on marketing as much as we have focused on mining,” he said. “To me, it feels like the right time to drive marketing and boost the brand and retail while reducing capital and spending on the mining side.”
This year, sluggish demand in China has been a major drag. In a sign of weakness in the market that normally imports diamonds, the country’s jewelers are relying on exports of polished stones to reduce their inventories.
Competition from lab-grown diamonds, which are about one-twentieth the price of natural stones, is also intensifying, especially in the United States. The country is the world’s largest diamond market, accounting for about half of the industry’s sales.
Mr Cook insisted there could be a “modest recovery” next year globally, including in the US.
“We’re starting to see signs of a (U.S.) retail recovery in October and November,” he said, pointing to credit card data that showed an increase in purchases of jewelry and watches this month.
Independent industry analyst Paul Zimniski said De Beers’ rough diamond sales are expected to fall by about 20% this year, after falling 30% in 2023.
“Given the lower base, the recovery in trade should lead to some relative growth in 2025,” he said, adding that next year’s global diamond jewelry sales will rise by about 6% to 84 billion yen. He added that he expected it to be in the dollar range.
