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De Beers has amassed its largest stockpile of diamonds since the 2008 financial crisis, revealing the challenge the group faces in reviving demand for jewelery long considered the pinnacle of luxury.
Declining Chinese demand, intensifying competition from lab-grown alternatives, and the legacy of pandemic lockdowns, when the number of marriages fell, have left the world's largest diamond producer by revenue with stock worth about $2 billion.
The inventory, which was not previously reported, hovered around $2 billion for most of the year, according to the company.
“It's been a bad year for rough diamond sales,” CEO Al Cook said.
It has forced a prolonged decline in demand that began with the Covid pandemic De Beers Take measures to reduce the supply of gemstones. It reduced production from its mines by about 20 percent from last year's levels and lowered prices at its latest auction this month.
Auctions are used to sell rough or uncut diamonds to a group of about 50 approved buyers known as sight holders, who are the most powerful dealers in the industry.
With a workforce of 20,000 people, De Beers has become a dominant force in the $80 billion diamond jewelry market since its founding in the late 19th century. The group's revenues decreased to $2.2 billion in the first half of this year, from $2.8 billion in the same period in 2023.
Its biggest competitor was the Russian company Alrosa Sanctions hit it G7 countries this year imposed restrictions on Russian diamonds after the all-out invasion of Ukraine in 2022.
The diamond market's struggles come as De Beers is set to be spun off into a separate company by its owner Anglo American. The FTSE 100 mining group has promised to divest De Beers after fending off a £39bn takeover bid from rival BHP this year.
Anglo CEO Duncan Wanblad warned that disposing of De Beers, whether through a sale or initial public offering, could be complicated by the weak state of the diamond market.
In an effort to boost sales, De Beers It launched a marketing push In October, the company focused on “natural diamonds,” echoing its famous advertising campaigns of the second half of the 20th century.
Cook, who has led De Beers since February 2023, said that as the group prepares for the spin-off, it will boost investment in advertising and retail, including expanding its store network to 100 stores globally, from 40 today.
“Rebooting this huge category marketing campaign… I think this is a very early indicator of what a standalone De Beers will look like,” Cook added.
“When we become independent, we have the freedom to focus on marketing as much as we focused on mining,” he said. “It seems to me that this is the right time to lead the marketing and support of our brands and retail, even as we reduce capital and spending on the mining side.”
Lukewarm demand in China has been a major drag this year. In a sign of weakness in the market, which usually imports diamondJewelers in the country have resorted to exporting polished stones to reduce their stocks.
Competition from lab-grown diamonds, which cost about one-twentieth the price of natural stone, has also increased, especially in the United States. The country is the world's largest diamond market and accounts for about half of the industry's sales.
Cook insists that next year could bring a “gradual recovery” globally, including the United States.
“We are seeing emerging signs of a recovery in the retail sector (in the United States) in October and November,” he said this month, pointing to credit card data that showed a slight increase in jewelry and watch purchases.
De Beers' rough diamond sales are on track to decline about 20 percent this year, after falling 30 percent in 2023, said Paul Zimnisky, an independent industry analyst.
“Given the low base, any recovery in trade should lead to some relative growth in 2025,” he said, adding that he expected global diamond jewelry sales to rise by about 6 percent to $84 billion next year.
