Anglo American’s De Beers, the world’s No.1 diamond miner by value, will once again let buyers reject some of the precious stones at the company’s upcoming sale amid weak prices and miners facing challenging times, especially those producing cheaper and smaller stones where there is too much supply.
Customers can refuse to buy half of the diamonds offered that are smaller than three-quarters of a carat, people familiar with the matter told Bloomberg on Wednesday. Customers will also be allowed to sell back some diamonds to De Beers, the sources said.
The unusual move (De Beers is known for requiring buyers to take what’s offered) says lots about the state of the low-end diamond market. However, it’s not the first time the industry leader adjust its policies to boost sales.
Late last year, the company let customers delay acquiring smaller stones for the first time. The company had only done something similar once before, in 2016, holding back supply in response to India’s move to ban high-value currency notes, which pushed down diamond demand.
In the past year, De Beers has also reduced prices for low-quality stones as much as 10%, in yet another sign of increasing volatility at the bottom end of the market.
Cheaper diamonds, which are often small and low quality, are selling for significantly less now than six years ago due to an unforeseen oversupply.
Mines built between 2003 and 2012 from Canada to Lesotho have been yielding a fair amount of cheap diamonds lately, surpassing the industry’s average. Additionally, major producers including Russia’s Alrosa and Rio Tinto’s Argyle operation in Australia have stepped up production.
Weighing on diamond prices is De Beers’ entry into the synthetic market, with many saying the move has added competition in the low-end, creating a big price gap between mined and lab diamonds, though there is no evidence either has happened so far.
A 1-carat man-made diamond sells for about $4,000 and a similar natural diamond fetches roughly $8,000. De Beers’ new lab diamonds will sell for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem.
By the time De Beers’ $94 million man-made diamonds plant outside Portland, Oregon, is fully online (by the end of 2020), it will produce about 500,000 carats of diamond rough a year. This year, the diamond giant expects to mine about 31 million carats, at the bottom end of a previous forecast range.