De Beers, the leading diamond producer globally, has taken significant measures to boost diamond sales by reducing prices. The diamond industry faced a major setback in the latter half of 2023 when the two largest miners drastically cut supplies to combat falling prices. While this move did offer some recovery for the market, the current demand from trade buyers remains uncertain. To address this, De Beers has implemented a 10% price cut across the board at its first sale of the year, which is traditionally one of the largest. Additionally, larger diamonds have seen even more significant price reductions, with a decline of approximately 25% in one category.

Since the beginning of the pandemic, the diamond industry has encountered numerous challenges. Initially, there was a surge in demand as consumers turned to luxury items like diamond jewelry while being confined to their homes. However, as economies reopened, demand quickly decreased, leaving manufacturers with excessive stock purchased at inflated prices. This decline was compounded by rising inflation in the crucial US market and consumer confidence issues resulting from a property crisis in China, a key growth market. Additionally, the emergence of lab-grown diamonds posed a new threat to natural diamonds. As a result, reducing the supply became necessary. Russia’s major diamond company, Alrosa PJSC, halted all sales for two months, followed by voluntary import bans by dominant cutting and trading sector Indian buyers. De Beers allowed customers to refuse contracted gem purchases in the final two sales of 2023 without lowering prices, although they have now removed this flexibility.

De Beers continues to hold a strong position in the rough-diamond market, conducting 10 sales annually. Buyers, known as sightholders, generally accept the offered price and quantities of diamonds. The most significant price reductions at the recent sale were observed in the “select makeables” category, referring to diamonds between 2 and 4 carats that can be cut into smaller polished stones for use in bridal rings. These diamonds, which already experienced substantial price cuts last year, saw an additional 25% decrease in price this month. They have been particularly affected by the growing popularity of synthetic diamonds, which have also experienced price declines.

The first sale of the year holds paramount importance for midstream buyers, responsible for cutting and polishing rough stones into jewelry, as they restock after the holiday season. The crucial question is whether the latest price reductions will create momentum in the market. Towards the end of last year, prices started rebounding as buyers without sufficient stones needed new inventory to sustain their factories amid limited supplies. The upcoming months will determine if the price cuts can continue to stimulate demand and revive the diamond industry back to its pre-pandemic strength.

Useful links:
1. De Beers official website
2. Gemological Institute of America