Diamond sales fall again in June
Brian Benza | Wednesday June 29, 2016 18:00
The sales figure, compared with a revised $636 million in the previous sight, represents a decline of 8.5 percent from $586 million revenue estimated by Rapaport News for the equivalent cycle last year.
“Sales in the fifth cycle of the year were somewhat lower than in the fourth cycle, in line with our expectations and typical seasonal demand patterns,” said Philippe Mellier, De Beers chief executive officer.
“Rough diamond demand and polished diamond prices remain stable, reflecting steady consumer demand, but we maintain a cautious outlook,” he said.
The figure includes the June sight held in Gaborone last week, as well as auction sales and supply to beneficiation and government partners. De Beers holds 10 sights a year to handpicked buyers who come to Gaborone from major cutting centres such as Tel Aviv, Mumbai, Antwerp to negotiate their parcels.
Although the decline in fifth sight sale represented a second straight downward trend, diamond sales this year are still significantly higher than in 2015, a development that would be a boost for Botswana.
Through royalties, dividends and taxes, government gets about 82 thebe from every P1 worth of diamonds that Debswana sells to De Beers. Debswana, which mined 20.4 million carats last year, sells all but Okavango Diamond Company’s (ODC) 15% share of its production to De Beers, which in turn sells the diamonds through 10 sales a year to handpicked buyers called sightholders.
Debswana dug up 5.33 million carats of diamonds in the first three months of the year, a five percent reduction from the 5.63 million carats produced in the same period last year. According to shareholder, Anglo American the marginal decline in output at Debswana was a result of the strategy to align production to trading conditions.
In 2016, the company, which produces about 70% of parent company De Beers’ production, plans to keep production at a flat 20 million carats this year, as it remains cautiously optimistic of the market despite early signs of an improved market sentiment in 2016.
In the June sight, rough prices were largely stable and sightholders generally rejected only lower-quality goods, buyers told Rapaport News. However, De Beers adjusted its assortments, resulting in some boxes becoming more expensive even as prices did not rise, sightholders reported.
Meanwhile a report by leading diamond expert, Martin Rapaport says the decision by UK to withdraw out of the European Union will not have a sustainable negative impact on polished diamond demand.
“The EU has not been a dominant diamond consumption centre for many years. While a negative wealth effect due to declining currencies and equity markets will reduce EU and British commercial demand, global investment demand for higher quality diamonds as a store of value will increase due to global economic and political uncertainty.
“Chinese and Indian diamond demand is not likely to decline due to Brexit and is sustainable at current low levels,” he said.
The important U.S. market is expected to remain healthy and retain growth.
However Rapaport says Brexit will intensify the pressure banks are putting on the diamond trade, as liquidity will continue to be reduced.