The diamond industry is set for a year of volatility, according to the chief executive of De Beers Group who has also outlined a number of organisational changes aimed at improving the sector.
At a recent event in Botswana as part of De Beers’ first 2016 sightholder sale, chief executive Philippe Mellier said there were reasons to be “cautiously optimistic” about the coming year.
“We have seen polished diamond prices start to stabilise and even increase in certain areas, we have seen some encouraging early indications from holiday season sales in the US consumer market and we have seen greater trading activity than at the end of 2015,” he stated.
Despite this, Mellier warned that the diamond trading environment was still “delicate”, and that the industry would likely experience volatility.
“There continues to be uncertainty regarding the macroeconomic outlook, currency pressures have the potential to weigh on downstream demand in a number of locations and we will need to see how retail restocking appetites develop,” he explained.
For this reason, Mellier said De Beers would implement a plan to “support and accelerate” the supply and demand improvements that had already begun to emerge within the diamond sector.
De Beers’ strategy
In terms of supply, Mellier explained De Beers would reorganise the internal structure of its Global Sightholder Sales business with the aim of increasing focus on sightholder relationships as well as product and service delivery.
He added that the company planned to further improve flexibility in supply: “Should your [sightholder] requirements for rough increase as we head into the second half of the year, you will still have the opportunity to increase your share of our availability through mechanisms such as ex-plan allocations, additional requests and purchases from our Auction Sales [business] events.”
Finally, it was said that De Beers would continue to invest in generic “non-proprietary” marketing to further stimulate consumer demand for diamonds and diamonds jewellery.
The comments followed news that De Beers would downsize its diamond production portfolio. In December, the company revised its 2016 production outlook to 26–28 million carats, down from 29 million carats in 2015.
The company’s 2015 fourth quarter results reflected these changes, showing a 16 per cent decrease in production to 7.1 million carats compared to the 8.4 million carats recorded in the previous corresponding period.
For the full year, total diamond production fell 12 per cent to 28.7 million carats from 32.6 million carats in 2014.
Other recently announced changes for De Beers included the suspension of production at a number of its diamond mines as well as the cutting of more than 1,500 jobs. The company also completed the sale of its well-known Kimberley Mines operation to newly formed consortium Ekapa Minerals late last month.