De Beers Rough Sales in November Lowest in a Year at $440M

Rough Market
21/11/2018 10:50

Riding the current wave of depressed rough diamond sales throughout the industry in recent months, De Beers' ninth sale of 2018 earned (provisionally) $440 million, the miner's lowest earnings in a sales cycle since October 2017. Soft demand from India has been the predominant factor in the decline of rough sales - particularly of smaller goods - across the industry. The seasonal slowdown on the threshold of Diwali - the Indian New Year holiday when many manufacturing units close - has been exacerbated by a weak Indian rupee (and a strong US dollar), the reduced availability of financing and high rough prices, which have led to shrinking margins. 

To accommodate the Indian market and bolster demand, De Beers sharply curtailed the prices of low-end goods, though commentator Dudu Harari at Bluedax says the effect of this move was limited. Analyst Paul Zimnisky reports that De Beers lowered its prices by 12% in smaller, lower-quality goods and 1-2% in medium sizes, while Bloomberg and Rapaport have reported that De Beers slashed its prices by high-single digits, and up to as much as 10%. As a result, Earnings from the Cycle 9 fell by 6% compared to Cycle 9 last year, and fell 9% from the $482 million in sales at the October sight.

Bruce Cleaver, CEO, De Beers Group, said: "As the industry’s focus turns towards the key end of year retail selling season, rough diamond sales continued to be in line with expectation during the ninth cycle of the year. While demand for smaller, lower quality rough diamonds continues to see some challenges, the latest cycle saw some signs of improvement in this area as factories in India begin to reopen after Diwali." For the year thus far, De Beers rough diamond sales are approximately $4.85 billion, which puts it on pace to match last year's revenue with one Cycle, the 10th, left to go this year.