Responding to slowdown, Diamond prices correction happening

Diamond Prices
[Image Courtesy: Rubel Menasche, De Beers, DTC]

With the ongoing slump in the diamond market and the continued struggles of the mid-pipeline players aggravated by weak financing, it appears from some recent developments that diamond prices correction is happening.

De Beers cut its diamond prices by 5%

One of the world’s largest diamond producer by value, Anglo American-owned De Beers has cut prices of its diamonds across range by around 5% for its November sight, and prices of some cheaper diamonds were cut reduced by double digits, according to some media reports.

This was company’s eight sight (sales event happening in Botswana for its customers, known as Sightholders) out of its annual 10 sights. In the past three sights the company made less than $300 million, a sharp drop from the 2016 figures.

Just some time ago to address the market crisis, De Beers had in an unprecedented move allowed its sightholders to defer purchases, offered buyback terms and even allowed them to reject more than half of stones less than 0.75 carats.

Diamond Prices
[Image Courtesy: De Beers, Bloomberg]

Edward Streck – Analyst, BMO Capital Markets London mentioned that ‘The De Beers price cut was catching up with the “reality of market conditions”’.

 

Other Diamond miners have also followed suit

As the mid-segment of the value chain was feeling the pinch in the market slowdown unable to make a profit, other diamond miners had no option but to lower their prices as well. Gem Diamonds and Lucara, known for digging some of the most expensive stones reported lower prices for their diamonds.

In the third quarter, Gem Diamonds sold its stones for $1,417 per carat, almost one-third down from $2,100 in 2018. While, Lucara realized an average selling price of $390, a 13% reduction from last year and 34% fall from 2015 prices of $593 per carat.

Even miners like Mountain Province who run the Gacho Kue diamond mine in Canada in a JV with De Beers, sold diamonds for an average of $53 per carat in third quarter – a sharp deviation from its expectations of $120 per carat as per its 2014 feasibility study.

 

Considering the already gloomy situation of traders and other stakeholders in the value chain, these diamond price corrections may not necessarily translate in lower retail prices, and instead may be used as a cushion to set off the losses or lower margins of mid segment.

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