De Beers Sales Slump Amid Market Weakness

RAPAPORT... De Beers' rough-diamond sales slowed in January as adisappointing holiday season piled further pressure on the midstream. Proceeds fell to $505 million at the first sales cycle ofthe year, 25% lower than the $672 million it sold a year ago, the companyreported Tuesday. January is typically one of the biggest sales periods of theyear for rough, as retailers and dealers restock after the holidays. However, sluggish polished demand resulted in caution among De Beers'buyers, a sight broker noted. Many of them rejected more goods than normal, including largerstones they don't usually refuse, he added. "Sentiment hasn't got much better over the holidays, sopeople are really struggling with polished sales being much slower thanexpected in January," the broker told Rapaport News Monday. "It led to alot of resistance at the sight. People looked at the goods, [but] margins areunder pressure, and, therefore, people were not particularly pleased with [thediamonds] they saw." The miner kept prices stable, but dealers saw a decline inthe premiums they could achieve on the secondary market, the broker added. Anumber of sight boxes are even reselling for less than the price at whichtraders bought them from De Beers. Many sightholders wanted to leave products on the table, butdidn't because they feared losing future De Beers supply, Dudu Harari ofbrokerage firm Bluedax wrote in a report on the sight. Meanwhile, there's currently little hope of any long-termimprovement in midstream profit margins, a sightholder explained. "Polished prices are stable, even if the market improves, sothere's no room for rough prices to go up on the secondary market," he said. "Evenif [profitability] increases, it will only be for a few months, because there'sa lot of competition in the market." Lower-priced stones have been especially weak. De Beers allowedsightholders to defer purchases at its September sale, and subsequently reducedprices of its cheaper goods at the November sight. Sales picked up in Decemberas traders returned from the Diwali break, but the lower-end items remainedslow this month. "Rough diamond-sales during the first sales cycle of 2019were lower than those for the equivalent period last year, reflecting higher-than-normal sales in the previous cycle...and the slow movement of lower-valuerough diamonds through the pipeline," De Beers CEO Bruce Cleaver said Tuesday. The fourth quarter of 2018 saw a mixed season at theconsumer level, with major retailers Signet Jewelers and Tiffany & Co. bothposting weaker holiday sales than they had expected. The US-China trade war hascreated concerns about consumer demand in the two largest markets fordiamond jewelry, while the Indian cutting sector is also struggling with tighteningbank credit and a weaker rupee. "It seems like there are no solutions to the problems theindustry is facing," Harari added, citing the impact of reduced financing, as well as competition from lab-grown diamonds."Manufacturers are saying rough prices aretoo high, and that the polished market is slow and selective. If the polishedmarket [were] better, there would be an increase in rough prices." Image: A De Beers sightholder examines a parcel of rough diamonds. (De Beers)