The diamond market has been struggling over the past year or so. Precious stone demand is falling, perhaps not so much in the sense that high-quality stones aren’t in demand, but that there has been such a flood of low-quality as well as artificial diamonds that buyers just aren’t interested in taking these stones anymore.
In turn, producers have to go out of their way to private special deals to simply shuffle off their accumulating inventories. The only ones benefiting from this situation are the end purchasers, who are enjoying lower diamond prices than ever.
As competition from laboratory-made diamonds continues to grow, producing stones at a much lower cost than traditional miners, companies are cutting back production to counteract this change.
De Beers, the world’s largest diamond miner in terms of market cap, is scaling back it’s planned production for 2019 as it tries to stop plummeting diamond prices.
Its Anglo-American unit went on to say that a number of factors, including trade tensions between Washington and Beijing, have all led to a 27 percent drop in earnings for the first half of 2019. With the U.S. being the world’s biggest market for diamonds, the ongoing trend of retail store closures has heavily hurt the company’s sales as well.
“Demand for rough diamonds was subdued in the first half…During 2019, demand outside the US continued to be impacted by US-China trade tensions, the Hong-Kong protests and a stronger US dollar, particularly affecting China and the Gulf,” said an official press release from the company. “In the US, retail store closures and destocking have also impacted demand for polished diamonds and, in turn, midstream demand for rough diamonds. Underlying GDP growth remains supportive of consumer demand growth and is expected to bring midstream and retailer stocks back to more normalized levels as we move into 2020, subject to an improving macroeconomic environment.”
De Beers previously used to have a virtual monopoly on the supply of precious stones, has been struggling to combat increasing competition from a number of laboratory-producing diamond firms, which can sell their stones ad a significantly lower cost than their peers.
Cheaper diamonds, which are almost always small and low quality, have reached a six-year low. A 1-carat artificial diamond sells for around $4,000, while a similarly sized natural diamond will sell for $8,000. De Beers has recently been developing its own lab-producing diamonds division, which are selling as low as $800 a carat.
Instead, the company has begun to move away from land-producing diamond mines, instead working to extract precious rocks underwater. While marine-extracted diamonds are harder to find, they tend to be worth the financial effort.
Around 95 percent of all precious rocks found in the sea are considered of “gem quality,” in comparison to only 40-60 percent of those mined on land. The challenging comes from ramping up production of marine-based mining efforts, which can be more expensive and take longer to set up then convention, land-based diamond mines.
What is certain is that the diamond market is entering new territory, where for the first time in history there’s a drastic device between artificial and natural diamonds.