De Beers, the renowned diamond company, has reported a significant decline in diamond sales, reaching the lowest point since the suspension of sales at the peak of the global pandemic. The industry is currently grappling with challenges stemming from weak demand and an oversupply of diamonds. In October, De Beers only managed to sell $80 million worth of rough diamonds, a substantial drop from the $454 million sold during the same period the previous year.

The decline in diamond demand can be attributed to several factors. As the pandemic gradually subsides, consumers are diverting their spending towards travel and experiences rather than luxury items like diamonds. Additionally, economic uncertainties in major markets such as the United States and China have resulted in a decrease in luxury spending. Furthermore, the increasing popularity of lab-grown diamonds in certain market segments has further impacted the demand for natural diamonds.

De Beers now faces stiff competition from its main rival, Russia’s Alrosa PJSC. In response to a significant decrease in demand from buyers in India, where about 90% of diamonds are cut and polished for jewelry, Alrosa suspended sales in September. Consequently, India also halted a substantial portion of its diamond imports, exacerbating the challenges faced by the diamond industry.

Initially, the decline in diamond prices mainly affected larger stones, particularly those popular in the US bridal market. However, the price decline has now spread to smaller goods as well. As a result, India’s cutting centers have suspended purchases in an effort to clear excess inventory.

De Beers typically holds 10 diamond sales each year, where buyers known as sightholders are generally obliged to accept the price and quantity offered. Although buyers have the option to decline purchases, doing so may impact their future diamond allocations. However, in response to the current market conditions, De Beers has granted sightholders greater flexibility to refuse purchases, effectively removing the contractual obligation.

Al Cook, the Chief Executive Officer of De Beers, has emphasized the company’s dedication to supporting its sightholders during this challenging period. By providing sightholders with full purchase flexibility, De Beers aims to help restore a balance between wholesale supply and demand in the midstream sector.

The diamond industry’s ability to recover from this sales slump remains uncertain. With weakened demand, excess inventory, and the growing competition from lab-grown diamonds, companies like De Beers will need to adapt and innovate to thrive in the evolving market.

Useful Links:
1. Bain & Company’s Global Diamond Report 2020
2. Statista’s Diamond Industry Statistics