De Beers Group is grappling with its largest diamond stockpile since the 2008 financial crisis, highlighting the difficulties the company faces in reviving demand for its luxury products. The world’s top diamond producer by revenue is contending with a series of challenges, including a sharp drop in Chinese demand, increasing competition from lab-grown diamonds, and the lingering effects of the COVID-19 pandemic, which caused a slump in marriage rates.
The company’s inventory, valued at approximately $2 billion, has remained at this level for much of the year, signaling a significant oversupply in the market. De Beers CEO Al Cook acknowledged the tough year for rough diamond sales, stating, “It’s been a bad year for rough diamond sales.”
To manage the surplus, De Beers has reduced its diamond production by about 20 percent compared to the previous year. Additionally, the company has lowered prices at its recent auction, where rough diamonds are sold to a group of around 50 certified buyers known as sightholders.
De Beers, a dominant player in the $80 billion global diamond jewelry market, has been forced to adapt amid these market pressures. The company’s revenues dropped to $2.2 billion in the first half of 2024, down from $2.8 billion during the same period in 2023. Meanwhile, its biggest rival, Russia’s Alrosa, has been significantly impacted by sanctions on Russian diamonds, which were imposed by the G7 nations following Russia’s invasion of Ukraine in 2022.
These challenges come as De Beers prepares for a potential spin-off from its parent company, Anglo American, which is under pressure after fending off a £39 billion takeover bid from rival BHP earlier this year. Anglo American CEO Duncan Wanblad has warned that the weak diamond market could complicate the process of divesting De Beers, either through a sale or an initial public offering (IPO).
In a bid to reverse its fortunes, De Beers launched a new marketing campaign in October, emphasizing “natural diamonds” in a nod to its iconic advertising efforts from the second half of the 20th century. As part of its strategy, the company is also increasing its investment in retail, including plans to expand its network of stores globally from 40 to 100.
Cook, who took the helm at De Beers in February 2023, sees the marketing push as an early indication of what an independent De Beers might look like. “As we go independent, we have the freedom to focus on marketing as hard as we focused on mining,” Cook stated. “This feels to me like the right time to be driving marketing and getting behind our brands and retail, even as we cut the capital and the spend on the mining side.”
A significant factor in De Beers’ struggles this year has been weak demand in China, which has traditionally been a major importer of diamonds. In response to lower domestic demand, Chinese jewelers have begun exporting polished stones to reduce their excess stockpiles.
Competition from lab-grown diamonds, which are priced at a fraction of the cost of natural stones, has also intensified, particularly in the U.S., which remains the largest diamond market globally, accounting for around half of the industry’s total sales.
Despite the challenges, Cook is cautiously optimistic about a global recovery in the diamond market. “We see the emerging signs of a retail recovery [in the US] in October and November,” he said, noting a rise in jewelry and watch purchases, as reflected in recent credit card data.
Industry analyst Paul Zimnisky predicts that De Beers’ rough diamond sales will decline by 20 percent in 2024, following a 30 percent drop in 2023. However, Zimnisky expects some recovery in 2025, forecasting a 6 percent increase in global diamond jewelry sales, which would bring the market to $84 billion next year.
Related topic:
Mike Boateng Engaged with Stunning Diamond Ring
Nita Ambani Wows with Dazzling Diamonds at NMACC Launch
Fiona Diamonds Expands Presence with New Flagship Store in Prayagraj
