Diamond miners are expected to have to offer more price cuts in 2016 to help the industry clear a backlog of stock and revive sales, according to sector experts, Financial Times reports. Lower prices and possible supply cuts will put further strain on the balance sheets of some miners including Anglo American, which owns De Beers, the largest supplier of rough diamonds by value. Although diamonds were a bright sport for diversified miners in 2014, the diamond trade has been pressured this year as lower consumer demand has created a big build-up of inventories and sharp falls in rough diamond purchases and prices.
Anglo American is heavily dependent on diamonds, with De Beers being the largest contributor to Anglo’s earnings in the first six months of 2015. De Beers said this month that it had pushed down rough prices by 15% during 2015 and cut output by about 12% to try to support prices. Ratings agency Moody’s said earlier this month that although rough prices are down 28% from a peak in 2014, the drop “may be insufficient to revive demand and we think producers may have to cut them further as these challenges continue into 2016.” Analysts at RBC Capital Markets also expect a further weakening of prices in 2016. “The debate will be around the extent of the cuts needed . . . our view is that it could be in the region of 15 per cent,” said RBC.
De Beers is due to hold its next sight in mid-January, and the miner has promised a new level of transparency, saying it will release sales data from its 10 annual sights.