But while De Beers implemented an increase of about 5% in its first sale of the year last week, customers are still buying. The sale hasn’t yet been finalized, but the miner was on course for its biggest rough-diamond auction in three years -- at about $600 million -- according to people familiar with the situation.
Still, the first sales of the year are the traditionally the busiest, when the industry’s middlemen rush to restock. If sales slow later in the year, prices could come under pressure again.
The risks of a short-lived revival are compounded by the billions of dollars of rough diamond stocks held by the two big miners. So far, they’ve resisted the temptation to start offloading the inventories.
“There’s a dilemma for the miners. If they choose not to sell, they lose out on monetizing stock, but if they sell too much they risk over-saturating the market,” said Anish Aggarwal, a partner at specialist diamond advisory firm Gemdax. “If they get this right, there will be support for prices.”
At the moment, the middlemen who cut, polish and trade the world’s diamonds are making money. In the so-called secondary market -- where buyers sell to gem manufacturers who don’t have direct access to De Beers or Alrosa -- boxes have been changing hands at premiums above 5%, and some in double digits, even after the price rise. That suggests manufacturers believe they can make a profit at current prices.
Rough diamond prices generally have recovered back to pre-pandemic levels, while polished prices are slightly higher. That’s good news for mostly small and private family-run businesses that cut, polish and trade the stones.
“So long as midstream stocks don’t get saturated, margins can be defended,” said Aggarwal. “All industry stakeholders -- miners, midstream and retailers -- will need to work in a measured way to enable this to continue.”
This article was provided by Bloomberg News.