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De Beers Records Lowest Sales of The Year

The diamond sales figures from De Beers, the world’s biggest diamond producer, are highly monitored worldwide as they act as an indicator of the health of the diamond industry.

From: weekendpost.co.bwDate: 2016-11-23 04:16:35Views: 485

Anglo American Plc has posted the lowest diamond sales for De Beer’s ninth sales cycle of 2016, amounting to $470 million, compared with the $494 million value of the eighth cycle of the same year. The diamond sales figures from De Beers, the world’s biggest diamond producer, are highly monitored worldwide as they act as an indicator of the health of the diamond industry.

“Encouragingly, the ninth cycle sales cycle of 2016 showed continued good demand for De Beers rough diamonds, with sales in line with expected seasonal demand patterns,” said Bruce Cleaver, CEO of De Beers. The figures fit in with expectations of slowing sales in the second half of the year. The diamond industry is seasonal, with the holiday period from thanksgiving in November through the Lunar New Year in Asia in January or early February the busiest period for jewellery sales.

Rough diamond prices have rebounded by 7.4 percent this year, a marked contrast to the slump experienced in 2015 when sales slumped by 18%. De Beers which holds ten Global Sightholder Sales and Auction Sales every year started 2016 strongly after a disappointing 2015. The sights or auction sales are restricted to the top 85 customers and its held in Gaborone.

In the first cycle of the year, the diamond behemoth sold $545 million worth of diamonds, up from the $210 million of sales realised in the tenth cycle of 2015. The company followed up with $617 worth of sales in the second cycle before ramping up diamond sales in the third cycle, bringing $666 million in sales which remains the highest of the year. In the first three months of the year, the diamond sales came to $1.8 billion, sparking concerns that the diamond producer might be selling too much too soon.

Part of the diamond slump in 2015 was due to buyers holding too many stones in their inventories which were not moving as fast as expected following a slowdown in China’s economy. In the second quarter of the year, De Beers’s auction sales recorded dwindling numbers. Philippe Millier who was De Beers CEO at the time said the slump in the fourth cycle was due to normal seasonal trends returning to the market and added that the company is encouraged by the continued stability of demand for rough diamonds shown in the fourth sales cycle. The seventh sales cycle defied expectations, as diamond sales went up by 21 % from the previous cycle.

Mr. Cleaver said the $639 million worth of sales was a result of healthy demand for the company’s rough diamonds as manufacturers brought forward some of their demand in order to cut and polish rough diamonds in time for the important retail selling season. However, the uptick in the diamond sales proved to be temporarily as rough diamond sales for the eighth cycle went down by 22.6% to $494 million on the back of normal seasonal patterns coupled with the shorter than usual period between sights 7 and 8, and the forthcoming holidays in some of the major diamond cutting centres.

De Beers which is majority owned by Anglo American Plc and the Botswana government which holds 15 percent, is also the other half of Debswana, a joint venture with the government. Debswana operates four diamond mines in the country (Orapa, Letlhakane, Damtshaa and Jwaneng). Jwaneng mine is largest and most valuable mine in the world. Diamonds are the mainstay of Botswana’s economy since they were discovered shortly after the country gained independence.

The partnership between the government and De Beers is one of the longest known public-private partnerships, stretching to 50 years.  The country is yet to diversify its economy from resources based despite imminent threats in the diamond industry that include competition from synthetic diamonds, stagnated growth in leading economies and the slowdown in China that affected several commodity prices.

In 2015 when diamond production fell due to waning demand, the country’s Gross Domestic Product (GDP)fell by 1.9 percent year on year, representing negative growth. However the diamond sector has rebounded and on its way to recovery as the country’s GDP for the first and second quarter have been positive.  The International Merchandise Trade Statistics show that the country exported over P48.6 billion worth of diamonds in the past eight months, representing more than 85 percent of the total export revenues so far this year.

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