For the first time in years, De Beers took more drastic steps to tackle the crisis in the Diamond industry by cutting prices across the board.
Being the biggest producer of diamond in the world, lowered its prices by 5% at its November sale, the move is aimed in helping to improve profit margin for the middleman in the diamond industry, a group of traders and polishers that buy rough gems from De Beers.
Many of this customers include family ruin traders in Countries like Belgium, Israel and India and also subsidiaries of Tiffany & Co. and Graff Diamonds, all are running on a very low margin of profit because of low prices and an oversupply of polished gems.
Edward Sterck, an analyst at BMO Capital Markets said "De Beers is a price setter and has not made any price cuts thus far, despite the open market price for rough diamonds falling by about 9% year-to-date," Customers should not expect the diamond prices to get down cheap any time soon.
Part of the problem in the diamond industry is that prices have stagnated as other luxury offerings, like shoes, handbags and resort vacations, crowd the field. It is also difficult for diamond trading companies to find finance from a bank, as it has been abandoning the sector after being hit by frauds and bad loans.
Last week, the company released data that showed demand for diamond jewellery rose 2.4% last year. In the market, like the US were half of the diamonds are being Sold the increase was 4.5%.
De Beers sells its gems through 10 sales each year in Botswana’s capital of Gaborone, and the buyers -- known as “sightholders” -- have to accept the price and the quantities they’re offered, says Bloomberg. Some sightholders now struggle to make money from a business that was once highly lucrative.
De beers Are not making enough profits, The Vomapnt made less than USD 300 million in each of the past three sales, which is the lowest as compared to data going back to 2016. The November data may help to understand whether price cuts are helping drive demand.
