Anglo American’s De Beers, the world’s No.1 diamond miner by
value, will once again let buyers reject some of the precious stones
at the company’s upcoming sale amid weak prices and miners facing challenging
times, especially those producing cheaper and smaller stones where there is too
much supply.
Customers can refuse to buy half of the diamonds offered
that are smaller than three-quarters of a carat, o people familiar with the matter
told Bloomberg on Wednesday. Customers will also be allowed to sell back
some diamonds to De Beers, the sources said.
The unusual move (De Beers is known for requiring buyers to take what’s offered) says lots about the state of the low-end diamond market. However, it’s not the first time the industry leader adjust its policies to boost sales.
Customers will be able to refuse acquiring half of the diamonds offered that are smaller than three-quarters of a carat.
Late last year, the company let customers delay acquiring smaller stones for the first time. The company had only done something similar once before, in 2016, holding back supply in response to India’s move to ban high-value currency notes, which pushed down diamond demand.
In the past year, De Beers has also reduced prices for low-quality stones as much as 10%, in yet another sign of increasing volatility at the bottom end of the market.
Cheaper diamonds, which are often small and low quality, are
selling for significantly less now than six years ago due to an unforeseen
oversupply.
Mines built between 2003 and 2012 from Canada to Lesotho
have been yielding a fair amount of cheap diamonds lately, surpassing the
industry’s average. Additionally, major producers including Russia’s Alrosa and
Rio Tinto’s Argyle operation in Australia have stepped up production.
Weighing on diamond prices is De Beers’ entry into the synthetic market, with many saying
the move has added competition in the low-end, creating a big price
gap between mined and lab diamonds, though there is no evidence either has
happened so far.
A 1-carat man-made diamond sells for about $4,000 and a
similar natural diamond fetches roughly $8,000. De Beers’ new lab diamonds will
sell for about $800 a carat. That’s a fifth of the price of existing man-made
stones and one-tenth of the cost of buying a similar natural gem.
By the time De Beers $94 million man-made diamonds plant
outside Portland, Oregon, is fully online (by the end of 2020), it will produce
about 500,000 carats of diamond rough a year.
This year, the diamond giant expects to mine about 31 million carats, at
the bottom end of a previous forecast range.