De Beers Sales Sink to Lowest Level Since 2015

RAPAPORT...De Beers' rough-diamond sales plummeted 53% this month ascustomers accepted the miner's offer to defer purchases until the marketimproves.Weak polished demand and excess supply in the manufacturingand trading sectors have hurt sightholders' appetite for rough goods, sourcesexplained. As a result, revenues fell to$250 million at De Beers' sixth sales cycle, the company reported Tuesday - the lowest since late 2015."In the US maybe the demand is there, but because of slowdemand in Hong Kong and China, we are not able to get the sales [to match] ourinventory," a sightholder told Rapaport News Tuesday. "It's difficult tomake money, and [with high inventories] it's difficult to keep on buying roughand manufacturing like normal." De Beers kept prices steady at last week's July sight inBotswana, after lowering them in June, buyers said. Instead of offering furtherdiscounts, it permitted customers to delay purchases, over and above thestandard allowance of one deferral of a box of goods per "band" (selection ofgoods) per half year. Relaxing the buying obligations should help ease thecrisis affecting the market, which will dissipate when diamonds work their waythrough the pipeline, De Beers predicted. "With ongoing macroeconomic uncertainty, retailers managinginventory levels, and polished-diamond inventories in the midstream continuingto be higher than normal, De Beers Group provided customers with additionalflexibility to defer some of their rough-diamond allocations to later in theyear," De Beers CEO Bruce Cleaver said. "As a result, we saw a reduction insales during the sixth cycle of 2019." Sales haven't been this weak since December 2015, when proceeds totaled $248 million. According to Rapaport estimates, the November 2015 sale was even smaller, at approximately $180 million.Sightholders and brokers showed little optimism that thesituation would improve soon, as companies need to sell their excess goods to redressthe imbalance of stocks. "The current crisis in the midstream has moved upstream,"Dudu Harari of brokerage firm Bluedax wrote in a report on the sight. "Thismeans producers can't sell the quantities they are used to. If they want toincrease their sales, there will need to be a big price correction downward toallow the market to reduce its stock of polished." De Beers' rough-diamond revenues have declined 23% year onyear in the first six sales cycles of 2019, according to Rapaport calculations.The next sight begins on August 19.Image: A De Beers employee holding a rough diamond at De Beers Sightholder Sales South Africa in Kimberley, South Africa. (Ben Perry/Armoury Films/De Beers).