De Beers Group, the world’s largest diamond producer, recently disclosed a significant 25% drop in its third-quarter diamond production. This steep decline marks a shift in the diamond market that reflects lower global demand, particularly from China, a country that had once been a rising star in luxury consumption. With production totalling only 5.6 million carats compared to last year’s 7.4 million carats, De Beers is feeling the effects of a global shift that has put both demand and the stability of diamond prices into question.
De Beers’ response to this dip has been to adjust its operating and sales strategy. In the face of declining demand, the company chose to combine its seventh and eighth sights, events where the company offers rough diamonds to buyers. This decision indicates just how much the demand downturn has influenced the company’s ability to move products through its usual channels.
As a result, De Beers is recalibrating, shifting the dates for its ninth and tenth sights up to capitalize on the holiday season. This move aims to support its sightholders, allowing them an opportunity to regain footing in a struggling market. However, the effects are yet to be fully seen, and this pivot also suggests a level of urgency for the company as it strives to balance inventory and manage cash flow during turbulent times.
Regional Production Declines and Exceptions in South Africa
De Beers’ production cutbacks affected nearly all its mining operations. In Botswana, where the Jwaneng mine has long been a core production site, diamond output dropped by 32% to 4 million carats. This cutback reflects De Beers’ strategy to trim high-volume operations in response to fluctuating market demands. Similarly, Namibia’s production fell by 14% to 500,000 carats, reflecting a deliberate reduction in its marine mining operations. Canada, too, saw an 11% decline, producing only 600,000 carats as lower-grade ore treatment continued, in line with De Beers’ cautious approach to costs.
South Africa, on the other hand, diverged from the trend. There, production rose by a striking 41%, reaching 500,000 carats. This increase, largely from the Venetia mine’s underground ramp-up, reflects a different strategic direction for De Beers in South Africa, where resources are committed to developing deeper mining capabilities.
Revenue Falls Despite a Higher Price Per Carat
Even as production volume dropped, De Beers did report an average realized price increase for rough diamonds. The consolidated year-to-date average rose by 4%, reaching $160 per carat. The company achieved this by selling a higher proportion of premium rough diamonds, a tactic designed to keep revenue steady despite lower overall volume. However, the 18% decrease in the rough price index counterbalanced these gains, highlighting the limits of this approach in sustaining revenue growth.
The revenue generated from the single sight in Q3, which combined sales of 2.1 million carats, fell significantly to $213 million from $899 million across three sights during the same period in 2023. This drastic decrease underlines the market’s volatility, as De Beers grapples with shifting global preferences, particularly from major diamond markets such as the United States and China.
Navigating a Challenging Market: “Worth the Wait” Campaign
De Beers has not only made tactical adjustments to production and sales but also launched a new marketing campaign, “Worth the Wait,” in collaboration with Signet Jewelers. This campaign is aimed at an audience of “zillennials,” those on the younger end of the millennial spectrum and the early Gen Z demographic, who are around the age of engagement. Designed to resonate with an age group increasingly focused on the values of quality and longevity, the campaign draws parallels between the personal growth required for a healthy relationship and the process of natural diamond formation.
De Beers’ targeted approach to marketing reflects a nuanced understanding of shifting values in the engagement ring market. While traditional consumer bases may be shrinking, reaching this new, values-driven segment could offset some demand decline.
Future Prospects and Market Outlook
The diamond market’s demand challenges seem unlikely to reverse soon. De Beers has kept its production forecast for the year stable at between 23 and 26 million carats but has stated it is “actively assessing” ways to reduce production in collaboration with its mining partners. This move aligns with the broader industry trend of adjusting supply to stabilize prices and avoid market saturation. For De Beers, whose parent company Anglo American has expressed interest in offloading the diamond giant, the coming months will be crucial as it navigates this market transformation.
De Beers’ efforts to adjust sight schedules and marketing strategies underscore the diamond industry’s sensitivity to economic fluctuations and changing consumer values. As the company pivots to adapt to a rapidly shifting market, industry players will be watching closely. For now, the message from De Beers is clear: adapting production, reducing operational costs, and targeting new consumer segments are key to sustaining the business in a world where the sparkle of diamonds may not shine as brightly as it once did. Canadian Jeweller Magazine #1 jewellery business magazine.