India slowdown cramps De Beers sales
Lewanika Timothy | Tuesday May 28, 2024 06:00
This was revealed in the latest sales report by De Beers in which the diamond miner projects that provisional fourth quarter sales will reach $380 million (P5.17 billion), which is a fall from last year’s Q4 sales of $479 million.
Al Cook, CEO for the group whose parent Anglo American is a subject of unsolicited takeover bid from rival BHP, said Friday the slowdown is part of a projected downward motion for the diamond market pushed by market pressures and a slowing down of the Indian economy due to elections.
“As expected, De Beers’ rough diamond sales in the fourth cycle of the year trended lower, in line with the seasonally slower second quarter and a quieter period of trading in India during the elections,” he said in a statement accompanying the sales figures. India, key marketplace for diamonds, is undergoing an election phase which has slowed down purchasing power of Veblen goods like diamonds as uncertainty persists in the market due to political pressures in the economy. As a normally, elections impose uncertainties in the economy which then lead to slowed spending in the economy amid low optimism from spenders.
Previously, Cook had said that the medium to long-term outlook for diamonds continued to be marked by under-supply and high demand, noting that rough diamonds passed their peak production era in previous years, while market demand continues to grow. This, he said, is the reason De Beers and government recently approved a $1 billion (about P10bn) investment for the initial stages of the Jwaneng Mine underground project. “We predict that production will continue to drop globally and that is why we are fast-tracking the underground expansion,” he said.
Local fiscal and monetary policymakers will be eagerly eyeing a potential rebound in global demand for diamonds, following the steep downturn last year. According to the Bank of Botswana data, local diamond exports plummeted to a meagre P141 million last year in November, compared to P3.1 billion in October. Rough diamonds prices and revenues for producers fell by double digits last year, largely due to high inventory levels of polished diamonds in the midstream, that section of the diamond pipeline occupied by cutters and polishers, who buy from mines and sell to jewellers.
The extraordinary post-COVID rebound for diamonds in 2022 increased supply into the midstream, which in 2023 encountered economic uncertainties in the United States, a softer-than-expected performance from China as well as the industry’s reputational knock from the continued flow of sanctioned Russian diamonds into the market.