De Beers banks on US for sales rebound

De Beers has cut its 2015 production due to weak sales
De Beers has cut its 2015 production due to weak sales

De Beers, one of the world’s largest producers of rough diamonds, says it is pinning hopes on the US Christmas period for the recovery of diamond sales.

The company recently lowered its full-year production guidance to between 29 million carats and 31 million carats from its previous forecast of between 30 million and 32 million carats due to projected weak sales.

Bruce Cleaver, De Beers head of strategic development told Mmegi Business in a teleconference on Friday that consumer demand for diamonds is likely to increase due to the US Christmas season which usually begins from late November.

“Christmas period in the US is very important as it sets the tone for the rest of the coming year. We sell about 35% of all the goods that are sold in the US in that one month. It is a very critical month,” he said.

Because of the importance that the Christmas period carries, Cleaver said they have come up with a number of initiatives in order to stimulate the market for consumers including a very big new marketing campaign focused on both the US Christmas and Chinese New Year.

“We are much focused on trying to make the US Christmas good because if the US Christmas season is good then we would expect confidence to come back in the market and the current indigestion in the midstream to play itself out quickly,” he said. He, however, noted that if the Christmas period is not good then one must expect the slowdown in diamonds sales to carry on much longer.

Cleaver further stated that the fundamentals of the business remain good and that the group often has its views based on the growth in demand against the growth in supply.

“We trust we can still be very confident about the industry even though we may be talking about some short term pain. In the medium to long term the industry is very well positioned in China and India and in other places,” he said.

 De Beers gets about 75% of its annual supply from Botswana through its joint venture with government, Debswana.

According to Cleaver, 2016 should be a little better than 2015, however noting that it is very much predicated on the global economy recovery.

Information published in the group’s diamond Insight report of 2015 shows that rough diamond sales increased by 12% in 2014 to over $20 billion. De Beers and ALROSA remained the largest sellers of rough diamonds in 2014, accounting for 56% of global sales by value between them.  In volume terms, total rough diamond production actually decreased by three percent to an estimated 142 million carats in 2014. The total production value was more than $19 billion, which represented an increase of almost six percent on 2013.

Global jewellery sales increased by three percent in 2014, exceeding $80 billion for the first time, the fifth consecutive year of growth since the financial crisis.

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