De Beers sells 90% of its production by value to an exclusive list of contract buyers known as sightholders, who are offered stones at 10 sales events or 'sights' held in Gaborone each year.
The balance is sold via auction to more than 900 registered buyers.
Sightholders, who comprise diamond cutting and polishing firms, are under contract with De Beers to make offers for and purchase the diamonds produced by the group throughout the year. Fulfilling that obligation has grown more difficult this year, as demand and prices for the precious stones continue to fall to levels last seen in 2019.
De Beers’ CEO, Al Cook, said the diamond giant would give its sightholders 'full flexibility' for the final two sights of the year, a statement read as relaxing the cutting and polishing firm’s obligations to take up their allocations from De Beers. Analysts said full flexibility suggested that sightholders could completely forego any purchases in the last two sights of the year.
Cook said that De Beers was also suspending its online auctions, which while being a smaller sales channel, demonstrates the group’s commitment to supporting the industry’s recovery.
“De Beers will continue to support its sightholders to help re-establish equilibrium between wholesale supply and demand by providing full flexibility for rough diamond allocations in Sights 9 and 10 of 2023, suspending De Beers Group online rough diamond auctions for the remainder of 2023, and investing an additional $20m in natural diamond marketing to help drive consumer demand during the holiday season,” the CEO said in a statement last Friday.
The moves come following a sharp slide in De Beers’ sales over several months, with earnings reaching a three-year low of $200 million in the recent Sight 8. Figures compiled by prominent diamond market analyst, Edahn Golan, indicate that the latest sales figures from De Beers are the lowest since the sixth sight of 2020, when the market was weighed down by the pandemic.
De Beers’ extensions of flexibilities to its sightholders and the suspension of online auctions, also follow a two-month moratorium on rough diamond imports imposed on Indian firms, who are responsible for 80% of the global cutting and polishing industry. The Indian firms said the suspension was required to better manage the balance between supply and demand, as producers continued pumping out stones despite the collapse in polished prices.
The crisis in diamonds this year has largely been caused by high inventory levels of polished stones in the midstream, that section of the diamond pipeline occupied by cutters and polishers, who buy from mines and sell to jewellers.
Last year’s extraordinary post-COVID rebound for diamonds increased supply into the midstream, which this year has met global economic uncertainties, a softer-than-expected performance from China, the industry’s reputational knock from the continued flow of sanctioned Russian diamonds into the market as well as stiffer competition from synthetics, resulting in the midstream glut.
Botswana, which accounts for about two-thirds of De Beers’ production, is bracing for the impact of the diamond downturn on the national budget and growth, authorities have said.
