De Beers, the world’s leading diamond producer, is taking bold steps to revive sales in a stagnant market. In the latter half of 2023, the industry came to a virtual standstill as the two largest miners significantly reduced supplies in an effort to prevent price collapse. While this move did help the market pick up slightly, it remains uncertain how willing trade buyers are to engage.
To stimulate demand, De Beers has implemented a 10% across-the-board price reduction in its first sale of the year, which is known to be one of the largest sales events. In addition, the company has made even larger price cuts for certain larger stones, slashing prices by approximately 25% in one category. These measures are aimed at enticing buyers and restoring confidence in the market.
The diamond industry has faced substantial challenges since the start of the pandemic. Initially, there was a surge in demand as consumers turned to luxury purchases, including diamond jewelry, while confined to their homes. However, as economies reopened, the demand quickly faded, leaving many in the trade with excess inventory purchased at inflated prices.
The cooling trend was further worsened by economic uncertainties in crucial markets like the United States and China. Rising inflation in the US and a property crisis in China led to a decline in consumer confidence, and the market was further impacted by competition from lab-grown diamonds. In response to these challenges, supply had to be curtailed, with Russia’s Alrosa PJSC suspending all sales for two months and buyers in India implementing voluntary import bans.
During the last two sales of 2023, De Beers allowed its customers to refuse the purchase of contracted gems but did not reduce prices despite the decline in the market. However, the company has now eliminated this flexibility, signaling a shift in strategy. These changes demonstrate De Beers’ commitment to adapting to market conditions and stimulating demand by offering more competitive pricing.
The most significant price reductions were seen in the category of “select makeables,” which includes diamonds between 2 and 4 carats that can be cut into smaller polished stones commonly used in bridal rings. Despite implementing substantial price cuts for this category last year, De Beers has further reduced prices by an additional 25% this month. This category has been heavily impacted by the growing popularity of synthetic diamonds, which have also seen their prices decline.
The success of these price reductions lies in their ability to drive momentum and entice buyers to make significant purchases, especially for midstream buyers who rely on restocking their inventory after the holiday season. Towards the end of last year, prices started to rebound as buyers sought new stock to maintain production amidst shortages. The limited supplies also contributed to the demand.
De Beers carries significant influence over prices and quantities offered in the rough-diamond market as a dominant player. With its ten annual sales, buyers, called sightholders, typically have little choice but to accept the terms set by De Beers. The response of buyers to these price cuts and its impact on the overall market’s recovery will be interesting to observe.
Useful links:
1. De Beers official website
2. Reuters Business section
