Diamond sector could take two years to recover unless De Beers can stage rescue act

THE diamond market is in a serious hole from which it could take the best part of two years to emerge, according to Goldman Sachs analyst, Jack O’Brien.

Previously, the narrative was for China to start stimulating demand with engagement and wedding jewellery sales beginning in tier one cities before moving to tier two and three cities. This would be supported by sustained existing demand in the US, which comprises about 49% of the market, and falling supply. New diamond mines are thin on the horizon whilst the large Rio Tinto mine, Argyle, is to close imminently.

According to O’Brien, however, the mid-stream market of cutters and polishers has collapsed in India owing to lack of credit leaving behind significant stockpiles. Alrosa, the large Russian diamond producer, expects to end this year with some 30 million carats of diamonds in inventory, roughly the same as a year’s production.

De Beers, in which Anglo American has an 85% stake, barely made any contribution to earnings in the group’s current financial year. But Cutifani is optimistic about the timeline of recovery which will be assisted by a $250m marketing push.

“I think De Beers will pick up fairly quickly,” he said. “We have to continue to invest so we’re continuing to invest in marketing.” He hopes that coming out of Covid-19, the group will be able to convince consumers that diamonds, though a very significant pull on discretionary spend in times of some asperity, are the right response.

“Life is fleeting and, therefore, you want to make sure that the people you love know that you love them. And what better way to say that than with a diamond.”

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