Diamond Prices Have Fallen By 5.7 Percent This Year
Although the diamond market experienced some recovery this year, Debswana Diamond Company’s rough diamond sales fell by 48.3 percent in the first quarter of 2024, as the sluggish market conditions faced in 2023 continued into the beginning of this year.
According data released by Bank of Botswana during the first quarter, Debswana sold diamonds worth $560.9 million, from $1.085 billion registered in the same period last year. In local currency pula terms, the decrease in Debswana sales was lower falling by 45.6 percent to P7.676 billion ($560.35 million).
In 2023 alone, Debswana which operates Jwaneng, Orapa, Letlhakane mines sold diamonds worth $3.44 billion from $4.59 billion registered in 2022, a year in which the mining giant made record sales.
While Debswana’s production increased by 2 percent to reach 24.7 million carats in 2023, the company made its intentions clear that it will cut production this year to match market conditions though there was no reveal of the production target for 2024.
The global diamond market struggled in 2023 due to global macroeconomic uncertainty and competition from lab-grown gems, leading to major industry players in the last quarter of the year taking measures to ease a supply glut in the pipeline caused by sluggish consumer demand.
In the past months major industry players have taken measures to ease an excessive supply , with India which is responsible for cutting and polishing 90 percent of the world’s rough diamonds – implementing a two-month import halt, while Okavango Diamond Company (ODC) cancelled its November and December 2023 auctions.
The demand for diamonds has declined as its spark fade in a key consumer market: China. According to reports, diamond prices have fallen by 5.7 percent this year, which is more than 30 percent decline from their all-time high in 2022.
Further, projections forecast that diamond prices could fall another 15-20 percent over the next 12 months.
The preference for lab-grown diamonds which can be up to 85 percent cheaper (than natural diamonds) also plays a critical role in pulling down prices of natural diamonds.
However, President Mokgweetsi Masisi was quoted by JCK News indicating that Botswana government may raise its shareholding in De Beers, as Anglo American seeks to sell and divest from the business.
“We are very happy about it. It’s the best thing. Anglo is under threat of being taken over by others. Diamonds are not in those companies’ forte. Diamonds are our forte. If it’s attractive to up our shares in De beers we will,” Masisi told JCK last week.
Debswana, which sells 75 percent of its production to De beers while 25 percent is taken by state owned ODC is equally owned by Botswana and Anglo American Plc’s De Beers.
In June last year, Botswana and De Beers cut a ten-year diamond sales agreement under which ODC’s share of Debswana output will rise to 30 percent at the signing of the new contract before it rises gradually to 50 percent by the end of the new contract, as the country seeks to get more revenues from its resources.
“We are very clear about that, in the same way we are clear about who should not own it. We are going to keep the bad guys out. We want entities to come in who are aligned with our vision of how to do business. We will inevitably partner with them, and we will invariably regulate them. They would need to tolerate us as a partner, in the same way as we tolerate them. So it’s all incentivised, and we’re aligned, and we move forward,”said Masisi.
Anglo, which managed to fend off a takeover bid by a rival BHP Group this week, plans to divest De Beers as part of its restructuring.
De Beers and Botswana have an agreement in place to finalise their new deal by June 28, but BHP’s takeover attempt has since brought uncertainty to the deal.