De Beers, the largest diamond producer in the world, has reduced its prices by as much as nine percent amid falling demand and mounting pressure to reduce supply. A general slump in commodities across the globe has been felt particularly in the luxury goods sector, including of course, fine jewellery and diamonds. Moreover, China, a key growing market for diamonds, has been hit significantly because of the country’s slowing economic growth and the tumbling stock market.
De Beers faces increasing pressure from other players in the industry
As a result of the global economic landscape, De Beers faces increasing pressure from other players in the industry, including cutters, polishers and traders, as they contend with their own falling sales and shrinking margins.
New fashion trends, which see the demand escalate for coloured gemstones, such as rubies, sapphires and emeralds, have in turn caused a decline in sales of diamond-encrusted jewellery. The growing popularity for less expensive alternatives is naturally enhanced further by economic fluctuations in both key and emerging markets. While a credit shortage from Antwerp Diamond Bank, a source of finance for 80 percent of the city’s industry players, adds further strain to the $80 diamond business. The gradual deceleration of the bank’s activities was decided by KBC Groep NV Yinren Group following the unsuccessfully completion of the subsidiary’s sale last September.
Twice so far this year, De Beers has reduced its production target from 34 million carats to between 29 and 31 million carats. The drop in production has led to Botswana, the biggest exporter of diamonds and where De Beers mines are predominately based, to reduce its GDP growth forecast by almost half. Despite starting the year with expectations of expansion at 4.9 percent, the Finance Ministry reduced the figure to 2.6 percent in August. “The downside risk to the projections continues to be the country’s high dependence on diamonds, whose demand and prices are subject to global fluctuations,” Bloomberg reported the Ministry as saying.
