De Beers, the world’s leading diamond producer, has executed one of its most substantial price cuts in years, aiming to rejuvenate diamond sales amid a stagnant market. The global diamond industry experienced a near standstill in the latter half of 2023, with major miners significantly reducing supplies to counter plummeting prices. While these measures contributed to a slight market improvement, the extent of trade buyers’ current interest remains uncertain.
In a bid to enhance demand, De Beers slashed prices across its inventory by approximately 10% during its inaugural sale of the year, a traditionally pivotal event in the diamond market, according to sources familiar with the matter. Larger reductions, up to 25%, were reportedly applied to specific larger stones. The insiders, requesting anonymity due to the confidential nature of the details, disclosed that the company made strategic adjustments to its pricing to reinvigorate market activity.
The diamond industry has faced tumultuous challenges since the onset of the pandemic. Initially thriving as homebound consumers turned to luxury purchases, especially diamond jewelry, demand faltered with the reopening of economies. This left many in the trade grappling with excess inventory purchased at inflated prices.
The situation worsened as the crucial US market faced inflationary pressures, China’s key growth market contended with a property crisis, and competition from lab-grown diamonds intensified. Faced with these challenges, the industry resorted to supply reduction, exemplified by Russia’s Alrosa PJSC suspending all sales for two months in September, followed by voluntary bans on imports by Indian buyers, a dominant cutting and trading center.
De Beers, in an effort to stabilize its position, permitted customers to reject contracted gem purchases during the final two sales of 2023 without adjusting prices. However, the company has now revoked this flexibility, indicating a more assertive approach. A spokesperson for De Beers declined to provide comments on these recent developments.
Typically reserving aggressive price cuts as a last resort, De Beers, a unit of Anglo American Plc, exercises considerable influence in the rough-diamond market with its ten annual sales. Buyers, known as sightholders, generally accept both the offered price and quantities during these sales.
The most significant price reduction at the recent sale affected a category termed “select makeables,” encompassing diamonds between 2 and 4 carats. These diamonds, used in bridal rings after being cut into smaller polished stones, are high-quality but not flawless. Despite substantial price cuts in the previous year, De Beers further reduced prices by an additional 25% this month. This category has faced challenges due to the increasing popularity of synthetic diamonds, which have also experienced price declines.
The initial sale of the year holds paramount importance as midstream buyers, responsible for cutting and polishing rough stones into jewelry, restock after the crucial holiday period. The critical question now revolves around whether these recent price adjustments will successfully generate momentum, as prices began to rebound toward the end of the previous year amid limited supplies and increased demand from buyers seeking new stock.
