Citing conversations with dozens of industry insiders, the Bloomberg report details tension between the world’s largest diamond producer and buyers frustrated by rising prices and inflexibility.
Battling the impact of an increasing supply of lab-created diamonds and declining demand in China, analysts suggest the market needs restructuring.
“Speaking privately, some of the company’s biggest customers say they are frustrated that the one-time monopoly seems unable to provide the leadership the industry needs,” writes Thomas Biesheuvel.
“But De Beers, which for years acted as a protector by providing its customers with built-in profit margins, says its own business must come first.”
He continues: “The company said it has already taken a range of actions, including reducing production, combining sales, offering additional flexibility to buyers and large-scale investments in marketing natural diamonds. It’s also been reluctant to pour even more discounted diamonds into a market awash with stones.”
In October, Anglo American CEO Duncan Wanbald insisted he was optimistic about the chances of a De Beers sale progressing. Industry speculation rose in January about the potential for a new bid from BHP Billiton; however, those reports were soon contradicted.
"The growing estrangement between De Beers and its buyers is just one symptom of the crisis gripping the $USD80 billion diamond industry, which stretches from the mines of Botswana to jewellery stores on New York’s Fifth Avenue,” Biesheuvel explained.
“What started as a post-pandemic slump has spiraled out of control so that even in a market renowned for boom and bust cycles, industry veterans say the crisis is the worst they’ve ever seen.
“For cheaper diamonds, a flood of lab-grown gems is rapidly squeezing out natural stones, especially in fashion jewellery and low-end engagement rings, and raising sweeping questions about the future shape of the diamond mining industry. At the same time, the industry is reeling from a collapse in China, the second-largest diamond market, where demand has plunged by 50 per cent since before the pandemic.”
In early January, it was reported that De Beers is currently holding its largest stockpile in more than two decades.
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