Weak Demand Weighs on De Beers Sales

RAPAPORT... De Beers' sales fell for the second consecutive month, ashigh rough prices and slim midstream profits softened demand from buyers,sightholders reported. Sales of $490 million in February were 13% below ayear ago amid weak interest in lower-value goods, the miner said Tuesday. De Beers mainlykept prices steady, prompting concerns from clients, many of whom had beenhoping the company would make adjustments to ease pressure on the market. "Prices should have gone down, because the margins are notthere for the manufacturers, but still they were quite firm," an India-basedsightholder told Rapaport News. "Already it's been almost one year thatit's been difficult to make money. That's not just with us, but with most[cutting firms]." Instead of reducing prices, De Beers held back goods, aiming to deal with an oversupply problem in the polished sector, another sightholder explained. The final sale total was surprisingly high, he noted.The miner hasn't brought pricesdown significantly since November, when it discounted its cheaper goods as tight Indian liquidity affected demand. However, since then, polished prices for melee with VSclarity and below have fallen 15% to 20%, while prices of some higher-clarity small goodshave declined 5% to 8%, the sightholder noted. "They feel that with less rough going into the pipeline, ifpolished picks up a bit, shortages will arise, and things will just carry on,back to where they were [before the market became bad]," the dealer said. That approach, however, is unlikely to help manufacturers make good profits, as the market is worse than De Beers thinks, he argued. The rough market has been weak since the start of the yearas disappointing holiday retail sales led to slower-than-usual restocking. Thathas hit De Beers' top line, with rough-diamond revenues down 20% to $990million in the first two sales of this year, according to Rapaport calculations.January proceeds slid 26% to $500 million, restated from an earlier figure of $505million. "Demand for rough diamonds remained consistent during thesecond sales cycle of 2019," De Beers CEO Bruce Cleaver said. "While overalldemand for lower-value rough diamonds remains subdued, we did see an increasein demand from India as factories begin to restock." The company declined tocomment on prices.Image: Kimberlite ore on a conveyor belt at De Beers' Venetia mine in South Africa. (De Beers)