Diamond Giant De Beers Reduces Weight Less Than 3/4 Carat Diamond Purchases

According to people familiar with the matter, Anglo American Plc, the parent company of the international diamond giant De Beers (Day Beers), has informed diamond buyers that from next week, the small diamond raw stone with a weight less than 3/4 carat can only purchase half of the agreed amount. In addition, buyers can also sell some diamonds to De Beers at a low price.

This move is rare for De Beers, because in accordance with convention, De Beers sells 10 batches of diamonds from Botswana every year to specific purchasers. After purchasers specify the number and type of diamonds they want, they need to purchase at De Beers set price, and no matter how the quality of diamond is, buyers should accept it.

This fully illustrates the current downturn in the diamond market, especially in the low-end diamond market.

From 2003 to 2012, the output of low quality diamonds with low volume and poor quality increased worldwide, resulting in overstock, oversupply and lower selling prices. In the past year, De Beers has lowered the price of low quality diamond raw stones by 10%.

Moreover, because of the excessive stock of polishing diamonds, tight bank loans and the overall market of diamond jewelry, the profits of diamond polishing dealers, dealers and cutting operators have dropped sharply. Many buyers of De Beers can not benefit from the purchase of diamond raw stone.

From May 21st to June 24th, the sales volume of diamond raw stone in the fifth batch of De Beers in 2019 decreased by 33% to 390 million US dollars compared with the same period last year, down 6% from fourth batches in 2019. De Beers 2019 sales fell 17% in the first half of fiscal year, and profits before interest tax depreciation and amortization dropped 27% to 518 million US dollars. (see "ornate ambition" report: Diamond demand decline, De Beers continued to cut production: 2019 sales in the first half of fiscal year fell 17%; De Beers diamond stone sales fell sharply compared with the same period last year, China jewelry market situation is grim)

In order to deal with these problems, De Beers has to choose to increase the flexibility of purchasers' purchasing. As early as the end of last year, De Beers began to allow purchasers to postpone the purchase of small diamonds.

In addition, due to the price advantage of artificial diamonds, natural diamonds are also facing great challenges. De Beers has also been competing with synthetic diamonds in recent years. In July 2018, the De Beers subsidiary Element Six invested $94 million to start the diamond factory near Portland, Oregon. The artificial diamond produced in this factory will be widely used in the accessories of De Beers brand in the future. (see: De Beers's $95 million diamond factory has broken ground, and its output is expected to reach 500 thousand carats after completion).

The move of De Beers led to a decline in the wholesale price of synthetic diamonds by about 60%. Therefore, people in the industry believe that De Beers is actually hoping to interfere with the competition of diamond makers through low-cost strategies and consolidate the status of natural diamonds. Author: Xu Bin