To beat slowdown, De Beer begins polished diamonds selling service

B2B service to offer third party sales on membership basis, plans to exploit its brand value

To complete its presence in the entire diamond value chain, global mining giant De Beers has entered into online sale of polished diamond on its auction platform which currently undertakes selling of rough diamonds.
 

De beers in an announcement on Friday said that its auction sale business will offer midstream diamond companies an opportunity to sell certain types of polished diamonds to other trade participants on its auction platform. The company plans to exploit the brand value which it has established over the last several decades.
 

According to trade sources, the service is available on membership basis just like any other business-to-business platform for its existing or new customers. It is also a natural expansion of the mining and marketing of rough diamond into polished stones. The B2B polished diamond sale would compete with existing players like Rapaport which Indian diamond processors could use for global sale.
 

“As a business, we are always looking to innovate and find new ways to meet our customers’ needs. Testing new ideas through pilots such as this is an important part of this process and we look forward to seeing how the trade responds to the extension of the third party selling service – once we have some initial feedback we can decide whether there is sufficient demand to continue with it,” Neil Ventura, Executive Vice President, De Beers Auction Sale.
 

The new limited scope, business-to-business pilot is an extension of the service for rough diamonds that was launched earlier this year. It follows existing customer demand for an equivalent for their polished diamonds. As with the third party rough diamond auction pilot, any seller wishing to use the service will need to comply with a range of ethical requirements including sellers’ integrity, history of diamond manufacturing and product disclosures.
 

Experts believe that De Beers has opted entry into various streams of revenue generation to beat the slowdown in diamond sales. Since, the diamond sales have performed poorly over the last few years due to the ongoing global economic slowdown, De Beers expanded its business horizon across all valuable areas.
 

“The only area left for De Beers was polished diamond retailing which the company has now entered into. The rough diamond sale has been going as usual. But, the entry into polished diamond retailing is perhaps an attempt to beat the slowdown and increase volume of business of De Beers Group,” said Dinesh Navadia, President Surat Diamond Association.
 

A few months ago, De Beers had entered into diamond certifications in line with existing players like Gemological Institute of America (GIA) and International Gemological Institute. The company has already been in rough diamond mining business from centuries. Last year, De Beers set up diamond grading and assaying unit in Surat (Gujarat), the diamond capital of India, at an initial investment of $10 million. Forevermark brand diamond jewellery has been one of the most trusted luxury ornaments in the market in this segment.
 

Meanwhile, global mining giant Anglo American-owned De Beers reported 19 per cent decline in rough diamond output on production cut at 8.4 million carats in April–June quarter 2016 as compared to 8 million carats in the corresponding quarter previous year. Production dropped 31 percent in Namibia, 26 per cent in South Africa and 12 percent in Botswana. During H1, 2016, however, overalls sales of the reported an increase of 8 per cent at $3.3 billion as compared to $3 billion in the same period last year due to 11 per cent jump in rough diamond sales volume.
 

Interestingly, average price per carat sold in the first half of 2016 was reported at $190, 16.2 per cent decline in the same period of 2015. The company’s full-year sales guidance remains unchanged at 26 to 28 million carats, subject to trading conditions.
 

De Beers in its recent Diamond Insight Report forecast uncertain picture for diamond sector. Since 2014, the world has experienced moderate annual global growth at 2.5 per cent. While consumer demand for diamonds is still growing in the US, growth has slowed in China and declined in India. Therefore, midstream players faced fresh pressure in 2015, when inventory indigestion led diamantaires to destock, impacting rough diamond sales.

Furthermore, diamond producers face increasing cost pressures as production comes from ever deeper mines, the report said.