De Beers curbs diamond supply as earnings drop
The De Beers CEO says the new vessel project to mine diamonds off the coast of Namibia is on track to add an estimated 500 000 carats per year from 2022.
LONDON - Anglo American's diamond subsidiary De Beers is scaling back production after trade tensions between the United States and China contributed to a 27% first-half fall in diamond earnings, its CEO said.
De Beers CEO Bruce Cleaver cited a range of factors in an interview, including trade tensions, the US government shut-down that ended in January and Hong Kong anti-government protests, which he said had left the diamond market in a state "not dissimilar from 2014/15".
The diamond market was weak in 2014/15 in the run-up to a deep commodity price fall linked to declining Chinese demand for raw materials.
"A nasty cocktail is affecting the mid-stream, with too much polished [diamonds], financial pressure from the banks and a slow-down in demand for jewellery," he said.
But demand was still expected to grow in the US market, the world's biggest, meaning stock levels should become more balanced in the second half of the year, Cleaver said.
De Beers is working with its customers and limiting supply, the company said. In the first half it reduced rough diamond production 11% year-on-year.
Synthetic diamonds
The group cites future diamond demand as one of the principle risks it faces.
De Beers has been fighting competition from laboratory-grown diamonds by producing its own synthetic diamonds from its Element Six subsidiary at a lower cost than peers.
The impact had been to reduce overall wholesale prices for laboratory-grown diamonds by around 60%.
Cleaver said De Beers was still working to eliminate what he said was customer confusion concerning the difference between mined diamonds and those produced in laboratories.
De Beers is banking on a long-term future for natural diamonds and is investing US$468 million in a new vessel to mine diamonds off the coast of Namibia.
Cleaver said the project was on track to add an estimated 500 000 carats per year from 2022.
De Beers owns 50% of Namdeb Holdings, while the Namibian government has the other half.
Namdeb Holdings delivered an underlying EBITDA of US$80 million in the first six months of this year, a drop of about 11% of US$10 million compared to the same half-year in 2018. – Nampa/Reuters
De Beers CEO Bruce Cleaver cited a range of factors in an interview, including trade tensions, the US government shut-down that ended in January and Hong Kong anti-government protests, which he said had left the diamond market in a state "not dissimilar from 2014/15".
The diamond market was weak in 2014/15 in the run-up to a deep commodity price fall linked to declining Chinese demand for raw materials.
"A nasty cocktail is affecting the mid-stream, with too much polished [diamonds], financial pressure from the banks and a slow-down in demand for jewellery," he said.
But demand was still expected to grow in the US market, the world's biggest, meaning stock levels should become more balanced in the second half of the year, Cleaver said.
De Beers is working with its customers and limiting supply, the company said. In the first half it reduced rough diamond production 11% year-on-year.
Synthetic diamonds
The group cites future diamond demand as one of the principle risks it faces.
De Beers has been fighting competition from laboratory-grown diamonds by producing its own synthetic diamonds from its Element Six subsidiary at a lower cost than peers.
The impact had been to reduce overall wholesale prices for laboratory-grown diamonds by around 60%.
Cleaver said De Beers was still working to eliminate what he said was customer confusion concerning the difference between mined diamonds and those produced in laboratories.
De Beers is banking on a long-term future for natural diamonds and is investing US$468 million in a new vessel to mine diamonds off the coast of Namibia.
Cleaver said the project was on track to add an estimated 500 000 carats per year from 2022.
De Beers owns 50% of Namdeb Holdings, while the Namibian government has the other half.
Namdeb Holdings delivered an underlying EBITDA of US$80 million in the first six months of this year, a drop of about 11% of US$10 million compared to the same half-year in 2018. – Nampa/Reuters
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