De Beers announced it is scaling back its expected production for the second time this year, due to a “prolonged period of lower demand.”
The diamond giant has now reduced its 2024 production target from 26 million–29 million carats to between 23 million and 26 million carats. In the spring, De Beers had slashed output from the originally announced 29 million–32 million carats. (De Beers mined 32 million carats in 2023.)
In a statement, De Beers attributed the cutback to “weaker demand [which] is expected to continue for some time, given the prevailing levels of midstream inventories.”
But it also forecast a “gradual recovery,” with “retailer restocking…supported by new natural diamond marketing, increasing engagement rates, improving macroeconomic conditions, and consumer confidence.”
De Beers CEO Al Cook said in the statement that “though demand in the U.S. has been steady and India remains robust, consumers in China are buying substantially fewer luxury products. Retailers are very cautious as they restock, creating higher than normal levels of midstream inventory.”
De Beers’ rough sales in the first half of the year totaled $2.2 billion, down from $2.8 billion the prior year.
Analyst Paul Zimnisky tells JCK that the reduction should be viewed positively, as it shows that De Beers isn’t just dumping goods on the market for profit.
“There was concern that the reliability of De Beers being the industry steward would soften given the company is up for sale,” he said. “It’s encouraging to still see De Beers supporting the market at the expense of near-term revenue, despite the situation with Anglo.”
In majority owner Anglo American’s most recent earnings call, CEO Duncan Wanblad said De Beers will probably be “the last” of the four businesses Anglo planned to sell, and it doesn’t expect a sale or demerger to be completed until the end of 2025.
“It would be great if we could sell the business into the right hands, but that’s very important…the right hands,” he said. “To the extent that’s not possible, I think moving down the IPO route is the right one…. Realistically, the sales option remains open until the day we go to the market with a prospectus.”
Wanblad described his recent meeting with Botswana president Mokgweetsi Masisi as “very positive.” De Beers has yet to finalize a contract with its largest partner, despite agreeing in June 2023 to sign one.
“All of us want to get to an outcome that’s good for all of us,” Wanblad said.
(Photo courtesy of De Beers)
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