De Beers predicts tough H2

SHARE   |   Sunday, 26 July 2015   |   By Kabelo Adamson

De Beers Executive Head of Strategy Business-Development and Corporate Affairs, Bruce Cleaver predicts that the second half of 2015 will be a tougher one for the diamond industry having encountered the similar situation in the first half.
Addressing a press briefing on Friday, Cleaver said growth in consumer demand has been constrained in the first half of 2015 due to weakness in the macroeconomic environment and USD strength impacting demand in non-USD denominated areas. The diamond industry is said to have begun facing pressures in Q4 2014 as consumer demand growth was softer than expected which led to abnormally high pipeline inventories of polished diamonds at the start of 2015. Even though the conditions in the midstream such as polishing and sorting, Cleaver said the expectation is that global diamond jewellery demand will remain stable during the rest of 2015, with the US anticipated to grow moderately and other markets expected to show growth in local currency, but the strength of the US Dollar and lower Chinese demand whose economy is struggling  with slower economic growth are likely to off-set this.
In an interview, Nigel Simson who is the Senior Vice President Sightholders Sales said last year consumers were buying less stock as they sold 21 percent less in Dollars and 26 percent less in carats. He said in the last year they took the decision to reduce the sales of their rough diamonds to allow their clients to reduce their stock which was aimed at balancing the supply and demand gap.
Just like Cleaver, Simson said he expects the rest of the year to be as challenging as the first half due to the challenges facing the industry such as commodity prices. Last week Mmetla Masire who is the coordinator of the Diamond Hub told this publication the diamond industry as a whole is undergoing difficult and challenging times but expresses hope that there will be a turnaround as the industry is cyclic and said this happen from time to time.
In a statement released on Friday by Anglo American, the mother company of De Beers, consumer demand for diamond jewellery slowed towards the end of 2014 and into the first half of 2015, driven by slower economic growth, a weaker than expected first quarter in the US and Dollar strength.
Diamond jewellery retailers are said to have experienced lower than expected sales growth over the period, leading to polished stock build-up and, accordingly weaker polished diamond purchases from the midstream and a decline in polished diamond prices.
The company has said that rough demand in the second half of the year will be dependent upon the level of retailer restocking that takes place in preparation for the main jewellery selling season in the fourth quarter.
Anglo noted that in the meantime, working capital concerns in the midstream are likely to cause some short-term instability in rough diamond demand.

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