The diamond industry faced a turbulent 2023, with the market showing signs of improvement early in 2024.
This uptick followed the end of a voluntary moratorium on rough diamond imports into India in late 2023 and a boost in diamond jewelry sales during the year-end retail season in the United States.
However, despite these positive signals, midstream polished diamond inventories remained unusually high, and retailers continued to restock cautiously, leading to a decline in demand for rough diamonds in the second quarter of 2024.
As a consequence, De Beers reported a drop in revenue for the first half of 2024, falling to $2.2 billion from $2.8 billion in the same period the previous year.
Rough diamond sales accounted for $2.0 billion of this total, down from $2.5 billion, with a 22 percent reduction in sales volumes, totaling 11.9 million carats compared to 15.3 million carats in the previous year.
Production also decreased, with output dropping from 16.5 million carats to 13.3 million carats, reflecting the lower demand for rough diamonds.
“Continued sluggish post-pandemic economic recovery in China is impacting the demand for all luxury products, and US demand remains broadly stable, though at lower levels,” stated De Beers Executive Vice President Paul Rowley during the company’s half-year results presentation in Gaborone on Thursday.
He explained that while India continues to show robust demand, retailers are cautious in their purchases of polished diamonds, with midstream inventories remaining higher than usual.
This has led to a slowdown in the demand for rough diamonds. Rowley added that De Beers is focusing its investments on major projects that promise the highest returns, including the relocation of De Beers Auction Sales to Gaborone as part of their strategic measures.
In response to these softer trading conditions, De Beers has been managing its rough diamond inventory levels by reducing production to align with demand.
Consequently, the company announced a further cut in its 2024 production target, lowering it from an initial range of 26 million–29 million carats to between 23 million and 26 million carats.
This follows a previous reduction in April, when De Beers cut its target from the originally planned 29 million–32 million carats, despite having mined 32 million carats in 2023.
The latest production cut was prompted by a disappointing $315 million in sales during the fifth sales cycle, marking a 31 percent year-on-year decline.
The reduction in output is seen as a necessary step given the continued weak demand and high levels of midstream inventories.
Looking ahead, De Beers forecasts a gradual recovery in demand, driven by factors such as retailer restocking, new marketing efforts for natural diamonds, increasing engagement rates, and improving macroeconomic conditions and consumer confidence.
De Beers Group Chief Executive Officer Al Cook expressed optimism about the future, stating, “Despite challenging conditions, we made great progress in delivering our Origins strategy.
We have streamlined the business, materially reducing our costs and ensuring we are best placed to grow value from mining to stores as conditions improve.
We are revitalizing demand for natural diamonds for a new generation of consumers as we continue to support consumer confidence in natural diamonds.”
Cook emphasized that the decision to reduce production is a strategic move to avoid flooding the market, thereby supporting the market’s stability at the expense of short-term revenue.
