De Beers Cuts Diamond Prices Amid Weak Global Demand

De Beers, the world's largest diamond producer, has responded to slumping demand by reducing diamond prices at its latest auction. This comes as the company grapples with its largest inventory since 2008, valued at approximately $2 billion. The primary driver of weakened demand has been a significant drop in marriage rates in China, traditionally a key market for diamonds.

To address these challenges, De Beers has also cut production at its mines by 20% compared to last year. The impact is evident in the company's financial performance, with revenue falling to $2.2 billion in the first half of 2024, down from $2.8 billion during the same period in 2023.

Shifting Strategies to Revive Sales

In an effort to stimulate demand, De Beers launched a marketing campaign in October emphasizing the unique appeal of natural diamonds. The company is also investing heavily in its retail footprint, aiming to expand its store network from 40 locations to 100 worldwide. CEO Al Cook remains optimistic, citing early signs of recovery in the U.S. retail sector, particularly in October and November, where credit card data showed increased spending on jewelry and watches. Cook anticipates a broader global economic recovery by 2025, which could support a rebound in diamond demand.

Industry Outlook and Path to Recovery

Despite the challenges, industry experts see potential for growth in the coming years. Independent analyst Paul Zimnisky projects a 20% decline in De Beers' rough diamond sales for 2024, following a 30% drop in 2023. However, he expects a modest recovery in 2025, driven by a low base effect. Zimnisky forecasts global diamond jewelry sales to grow by 6% in 2025, reaching $84 billion.

While De Beers faces headwinds, its strategic adjustments—such as price cuts, production reductions, and increased marketing investments—could position the company and the broader diamond industry for a rebound as global economic conditions improve.

Conclusion

De Beers' decision to lower diamond prices underscores the challenges the company faces amid weak demand and high inventories. However, with strategic initiatives and signs of recovery in key markets, the company is cautiously optimistic about its prospects for growth in 2025 and beyond