The $80 Billion Diamond Market Crash Leaves De Beers Reeling

The diamond market, once a glittering beacon of luxury and wealth, has been left reeling by a monumental crash, with De Beers, the world's largest diamond producer, feeling the brunt of the downturn. The company has amassed its largest diamond stockpile since the 2008 financial crisis, reflecting the ongoing challenges in the luxury gemstone market.

The slump in demand has been attributed to a combination of factors, including weak sales in China, growing competition from lab-grown alternatives, and the lingering impact of the Covid-19 pandemic, which disrupted global marriage rates. "It's been a bad year for rough diamond sales," admitted De Beers CEO Al Cook.

To mitigate the downturn, De Beers has implemented several strategic moves. The company has cut production by around 20% compared to last year and reduced prices at its most recent auction of rough diamonds. These auctions involve selling uncut stones to a select group of certified buyers, known as sightholders, who are pivotal players in the diamond trade.

Despite these measures, De Beers' stones are still more expensive than the going rate in the secondary market, indicating the persistent pressure from lab-grown alternatives. The company's revenue fell to $2.2 billion in the first half of 2024, down from $2.8 billion in the same period of 2023. The decline comes as De Beers prepares to be spun off by its parent company, Anglo American, which promised to divest the diamond producer following a thwarted takeover bid by BHP. Anglo American CEO Duncan Wanblad has warned that the weak market complicates potential sale or public offering plans.

In response to market pressures, De Beers launched a marketing campaign in October highlighting the unique appeal of natural diamonds. Cook outlined plans for the company to invest in advertising and retail, expanding its network of global stores from 40 to 100. Competition from lab-grown diamonds, which cost a fraction of natural stones, has intensified, particularly in the US, the world's largest diamond market. However, Cook expressed optimism for a global recovery in 2024, citing recent credit card data showing increased US purchases of jewelry and watches in October and November.

Industry analyst Paul Zimnisky projected a 6% rise in global diamond jewelry sales to $84 billion in 2025, offering hope for an eventual market rebound. Despite the challenges, De Beers remains a dominant force in the $80 billion diamond jewelry market, with a 20,000-strong workforce and a history dating back to the late 19th century. As the company prepares for an independent future, it must navigate the complexities of the diamond market and adapt to the shifting preferences of consumers.