Global diamond merchant De Beers has seen a significant fall in the sale of rough diamonds in the global market, hit by a challenging trade environment amidst escalating US-China tariff tensions and a widespread consumer slowdown in several markets, including India. The company announced its financial results for the first half of the year this week, disclosing a 21 per cent decline in rough diamond sales during the period at $2.3 billion from $2.9 billion and a 13 per cent decline in volume terms.
“Demand for rough diamonds was subdued in the first half. In late 2018, US retail results were impacted by stock market volatility and US-China trade tensions which resulted in both retailers and the midstream starting 2019 with higher than anticipated stock levels. During 2019, demand outside the US continued to be impacted by US-China trade tensions, the Hong-Kong protests and a stronger US dollar, particularly affecting China and the Gulf. In the US, retail store closures and destocking have also impacted demand for polished diamonds and, in turn, midstream demand for rough diamonds,” it said.
India’s large diamond processing and retail industry is also feeling the pinch of the ongoing slowdown. According to data from the country’s Gems and Jewellery Export Promotion Council (GJEPC), import of rough diamonds fell 26% in April-June 2019 to $3.4 billion compared to $4.5 billion during the same period last year. In June alone, rough diamond imports fell 36% to $969 million from $1.5 billion.
For De Beers, the slowdown has also led to lower margins. “Underlying EBITDA decreased by 27 per cent to $518 million (30 June 2018: $712 million) due to the challenging midstream trading environment and slowing consumer demand growth, which has resulted in a decrease in the rough diamond price index and realised price, as well as lower margins in the trading business,” it said.
Going forward, however, De Beers said it believes that underlying GDP growth remains supportive of consumer demand growth and “is expected to bring midstream and retailer stocks back to more normalised levels as we move into 2020, subject to an improving macroeconomic environment”.
Rough diamond trading in the mid-term is likely to be affected due to high polished diamond inventory levels. Longer-term, the outlook remains positive in light of the expected growth in consumer demand and reducing supply.
Outlook remains promising, says company
Going forward, De Beers believes that underlying GDP growth remains supportive of consumer demand growth and “is expected to bring midstream and retailer stocks back to more normalised levels” closer to 2020, subject to an improving macroeconomic environment.