The diamond industry struggled during the first half of the year owing to the euro zone debt crisis, sluggish economic recovery in the United States and depressed demand in Asia.
De Beers felt the heat during this period under consideration as it had to endure an embarrassing 50 per cent drop in profits in the first half of 2012, while its total sales also fell to $3.3 billion from $3.9 billion a year ago.
The group’s diamond production dipped to 13.4 million carats as it continued to focus on repairs and maintenance, while it awaits improved demand from sightholders.
De Beers head of media relations Lynette Gould told our African Bureau Editor-In-Chief Mathew Nyaungwa that trading conditions in the mid-stream were expected to remain challenging during the second half of 2012.
However, she said a moderately positive growth in global diamond jewellery sales was anticipated for the full year 2012, although at relatively modest levels, especially when compared to the exceptional growth levels recorded last year.
Excerpts:
What is the state of the diamond market at the moment?
Trading conditions in the mid-stream are likely to remain challenging during the rest of 2012. At the August Sight, Varda Shine, CEO of the Diamond Trading Company, presented De Beers Group’s proposals to Sightholders and brokers to address this issue:
De Beers Group will invest in a Forevermark Q4 marketing campaign in the US called ‘Centre of my Universe’;
The US is a market where we have a strong track record of marketing success and is a market that has been performing well in 2012 in terms of consumer demand;
De Beers will continue to look at its pricing strategy to ensure it accurately reflects current market conditions;
De Beers will continue with its dynamic distribution strategy ensuring that the businesses best able to add value to our diamonds, and those that perform the strongest, are those that will be able to maintain, and potentially grow, their share of our supply.
The combination of these actions (alongside a better than expected International India Jewellery Show last week [August 23-27]) seems to have provided a platform for more stability in the rough market. Along with the rest of the industry we now look forward to the important key selling season with Thanksgiving, Diwali, Christmas and Chinese New Year.
Do you see global diamond jewellery sales on the upswing this year?
Provided there are no unforeseen economic shocks we expect to see moderately positive growth in global diamond jewellery sales for the full year 2012, albeit at relatively modest levels, especially when compared to the exceptional growth levels seen in 2011. In the short term, the US, China, Gulf and Japan are expected to contribute the bulk of the growth, while India and Europe are expected to remain weak.
Reports say De Beers is studying U.S. diamond retailing and polishing after settling lawsuits that had prevented it from operating directly in the country for more than 60 years. What sort of an impact did this ban had on the operations of the group?
De Beers was never prohibited from doing business in the US as a result of the class actions; we chose to limit our activities there.
The US is still the world’s largest diamond jewellery consumer market and, with our legal issues resolved, we are pleased that we can now look freely at any business opportunity.
Despite the lawsuit, De Beers Diamond Jewellers and more recently, Forevermark, were launched successfully in the US.
Can you confirm if De Beers has increased the value of diamonds it makes available to manufacturing companies in Botswana to $800 million a year from the current $550 million?
We remain fully committed to supporting downstream diamond manufacturing in all our producer countries and we are certainly increasing the value of diamonds we offer to local Sightholders in Botswana. $1.3 billion worth of diamonds, representing 20 percent of global De Beers’ sales, was sold in 2011 to local Sightholders in Botswana, Namibia, South Africa and Canada.
Has Botswana made use of its 10 percent allocation of Debswana throughput?
Not yet but Government would be best placed to comment further.
Are De Beers’ low grade diamond sales, particularly in Asia being affected by cheap diamonds from Marange?
No. In fact demand from our Sightholders for those type of goods is outstripping our ability to supply.
De Beers had been prospecting for diamonds in Angola for some time. Are there any prospects of finding profitable mines in this southern African country?
De Beers has done extensive exploration work in Angola for a number of years and the country remains highly prospective.
How has De Beers managed to keep its mine workers calm in the midst of widespread strikes - often violent - in South Africa?
De Beers values the good relationships it has with organised labour in South Africa. We are committed to the welfare and wellbeing of the men and women who work for De Beers.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
