Johannesburg - De Beers reported its lowest rough diamond sales this year as it entered a seasonally slower time of the year.
Despite the lower sales, the figures were decent given normal seasonal demand weakened around the upcoming holidays in some of the main cutting centres, analysts said.
De Beers, which is 85 percent owned by Anglo American, said yesterday that it had sold $485 million (R7 billion) worth of rough diamonds in September compared with the $639m in August.
De Beers’ chief executive, Bruce Cleaver, said the September auction numbers were better than expected.
“Demand for De Beers’ rough diamonds in cycle 8 continued to reflect the improved midstream trading environment compared with 2015,” he said. “Our sales were slightly ahead of expectation given the normal seasonal demand patterns, the shorter than usual period between sights 7 and 8, and the forthcoming holidays in some of the major diamond cutting centres.”
De Beers has 84 accredited clients or sightholders - who buy rough diamonds in the 10 sights, or auctions, held a year.
Market weakness
Apart from Sights, and in smaller volume, there are the auctions that are open to a larger number of customers.
Rough diamond sales at De Beers slumped 40 percent to 20.6 million carats last year due to market weakness and lower diamond manufacturing levels took their toll.
The industry is seasonal with a peak from the end of October with Diwali to the Chinese New Year in January to Valentine’s Day in February.
De Beers’ customers buy rough stones earlier in the year to prepare for this period.
RBC Capital Markets analyst Des Kilalea said yesterday that a smaller sale was to be expected given the diamond market was well supplied and was entering the slower demand season for rough diamonds. “A smaller, though still significant, sale reflects the fact that the market this year has absorbed significant quantities of rough already.”
He noted that total rough sales by De Beers to end-September were $4.7bn based on the figures released in the year to date. “This time last year we calculated De Beers cumulative sales were $3.35bn, a reflection of a relatively modest first half $2.7bn total and very low sales of $1.4bn in the second half.
“On our figures, De Beers sales could total $5.5bn this year compared with $4.1bn in 2015,” he said.
Barclays Equity Research analyst David Butler said the results were positive. “The results continue to point to a positive trend so far this year, we remain relatively cautious on the outlook for diamond prices in the short term given high mid-stream inventories and continued weak retail sales across Asia and to a lesser extent in the US,” he said.
Chinese demand growth for diamond jewellery saw a considerable slowdown after being the engine of growth for the industry in the last decade.
BUSINESS REPORT