De Beers today announced that the provisional sales of the 6th shopping fair (and auction) in 2023 will be 410 million dollars. This value has decreased by 10.09% compared to the 5th trade fair (456 million) and 35.74% compared to the 6th trade fair (638 million) in 2022.
▲ De Beers saw the change of sales at the fair+auction
Time: 1st time in 2022-6th time in 2023
Data source: official website of De Beers Group
The year-on-year change in revenue during each inspection results in the following curve:
▲ Data source: official website of De Beers Group
reason
From the above curve, it can be seen that since the fifth sales cycle in 2022, the demand for rough diamonds in the middle reaches of the natural diamond industry (i.e. cutting and grinding processing) has continued to decline. During this period, there were two small increases, but the overall downward trend did not change as a result.
There are several macro level reasons for this:
1) The midstream is not optimistic about the future downstream market forecast.
2) The number of naked diamonds hoarded in the middle reaches is still relatively large (as evidenced by the previous Rapport analysis).
3) The price difference between rough diamonds and bare diamonds is still insufficient to benefit the middle class, thereby reducing the demand for rough diamonds in the middle class.
4) De Beers' recent price cut is also the reason for the decline of the sales revenue of the Fair since the beginning of this year.
5) Natural diamond blanks are still in a state of oversupply.
In addition, the opinion of Al Cook, the executive officer of De Beers is:
Consistent with seasonal trends, sales of rough diamonds were at a lower level in the sixth sales cycle of this year. Given the challenges of the current macroeconomic environment, the middle reaches of the diamond industry continue to adopt cautious purchasing methods.
Cultivate the penetration of diamonds
In some media reports, the reason for the decline of De Beers' sales is more attributed to the penetration of diamond cultivation, which is reasonable. However, we suggest considering India's import and export data first
A. In June of this year, India's penetration rate of diamond rough imports was 5.49%, slightly lower than the average penetration rate of 6.76% in the 2022-2023 fiscal years. This is related to the price reduction of rough diamonds, as well as factors such as India's increase in domestic production.
B. In contrast, the export penetration rate of India's cultivated diamond bare diamonds in June was 6.59%, which is still lower than the average penetration rate of 7.08% in the 2022-2023 fiscal year. However, the performance of this sector seems to be slightly better than that of rough imports.
Considering the fact that the prices of cultivated diamonds have decreased, we can see that these products are growing in large quantities. However, from the perspective of trade volume, we may not be able to fully attribute the decline in natural diamond sales (especially rough diamonds) to the role of cultivated diamonds.
Summary
Anyway, it is an obvious fact that the global diamond market is going through a difficult period. Especially for the natural diamond industry, changes in the economic environment should be the most important influencing factor (and challenge). But as long as marketing work is not stopped, its value should continue to follow the (historically tested) trajectory of resilience development.
At the same time, under the influence of the economic environment, it seems that cultivating the diamond industry will also face an important reshuffle (or several). The judgment and restraint of the upstream, the tendency of the midstream, and the marketing ability of the downstream will all participate in determining the future direction of this industry.