De Beers is sticking to its revised production target as it is at its lower point of the cycle, amid weakening demand, Group Executive Vice President, Paul Rowley said.
Rowley said on Thursday that the biggest diamond producer faces a glut in diamond supply because of excessive amount of polished diamonds in the pipeline.
“What we need to do is to play our part and ensure that we ease that back until the demand and supply comes back into balance,” said Rowley.
“On that note, we have revised production guidance lower to 23 – 26 million carats. That is really a strong message in the context that we have in the natural diamond industry.”
Rowley believes the industry will still remain under pressure considering the current macroeconomics, though talks of recession have since dissipated.
“But there is no doubt that China remains particularly difficult at the moment and we will be monitoring that closely,” he said.
“The US, with our marketing campaigns and collaborations, we should be able to see some benefits coming out.”
But even so, Rowley maintained that the group does not anticipate a holistic return, which is why De Beers is taking the revised production guidance into 2025.
It has been a difficult first half of the year for De Beers with total revenue decreasing to $2.2 billion, from $2.8 billion last year, with rough diamond sales decreasing to $2.0 billion, compared to $2.5 billion in 2023.
Total rough diamond sales volumes decreased by 22 percent to 11.9 million carats (30 June 2023: 15.3 million carats).
The average realised price is flat at $164/ct (30 June 2023: $163/ct), which De Beers said reflects a larger proportion of higher value rough diamonds being sold, offset by a 20 percent decrease in the average rough price index.
“It is fair to say that we started 2024 so much very cautious, and we were right to be cautious,” said Rowley.
“It has not been an easy six months. We did have a little bit of an upliftment in the first quarter, but in the diamond industry that is not unusual.”
Rowley explained that the challenge in the first six months of the year was largely driven by China.
“When China reopened, the economy struggled to take off,” he said.
“The US had a difficult 2023, but the 2024 season has been fairly steady. I don’t think it has been that bad.”
Rowley said De Beers is reasonably comfortable with the US market, though the demand for natural diamonds is slightly lower than the peak, after peaking in 2022.
“It is an important market for us, the problem we have is that there is an excess of polished in the pipeline and some of that excess is coming out of China which is putting pressure on demand,” Rowley explained.
“On top of that, there is lab-grown diamonds, but we are starting to see real differentiation which is one of the positives.”
De Beers believes the wholesale prices of lab-grown diamonds continue to fall, exacerbated by ballooning stocks of lab-grown diamonds in India.
In turn, lab-grown diamond retail prices remain on a downward trajectory, and it is expected that these trends will further reinforce consumers’ understanding of the fundamental differences between lab-grown and natural diamond jewellery.
Given the rapidly deteriorating economics of selling lab-grown diamonds as their prices continue to drop, De Beers said there are also signs that retailers in the US are returning their focus to natural diamonds.
At the end of May this year, De Beers announced its new Origins strategy, with a focus on four key pillars underpinned by a plan to streamline the business sustainably by reducing overhead costs by $100 million per year.
These comprised focusing upstream investments on the major projects that will deliver the highest returns; integrating the midstream to deliver greater efficiency; resetting the downstream by reinvigorating category marketing and evolving proprietary brands through scaling up De Beers Jewellers and refocusing Forevermark solely on the fast-growing Indian market; and pivoting synthetics, with Lightbox suspending production of lab-grown diamonds for jewellery.
While industry challenges are expected to remain in place until next year, Corporate Director at Absa Bank Botswana, Tebogo Giddie, recently told this publication that the diamond market’s outlook for the rest of the year will depend on balancing consumer demand, economic conditions, industry trends, and geopolitical factors.
As the prospects for economic growth in many major economies remain uncertain, she said it is expected that it may take some time for rough diamond demand to fully recover to pre-COVID-19 levels.
Economist at FNBB, Gomolemo Basele, also argued that activity indicators for natural diamond demand point toward recovery, but said the growth trend remains well below longer-term secular dynamics, contributing to market price volatility even as demand tracks higher.
Basele insisted that the midstream segment of the global value chain continues to reflect pressure with excesses, which act as a drag on market prices despite buoyancy in Indian import volume growth.
However, De Beers believes the growing focus on diamond provenance has the potential to reinforce demand for its ethically sourced rough diamonds, supported by provenance data registered on the blockchain Tracr platform, particularly given enhanced sanctions on Russian diamond import restrictions by G7 nations expected to be introduced next month.
