The coronavirus froze up the diamond market so dramatically that the two biggest producers hardly sold any gems at all in the last three months, their combined sales plunging 94 per cent from a year earlier.
De Beers and Russian rival Alrosa PJSC both reported second-quarter sales figures Thursday, at a total of US$130 million in rough diamonds between them. A year ago, the two companies sold US$2.1 billion.
The pandemic has devastated the diamond world. With jewelry stores closed, cutters and polishers stuck at home and global travel at a standstill, the entire diamond industry essentially came to a halt. That’s piled pressure on the biggest miners who have moved to protect the market by refusing to cut prices.
De Beers and Alrosa have made major concessions to their normal sales rules -- allowing customers to renege on contracts and view diamonds in alternative locations.
They’ve also reduced production in an effort to control stock levels, but that hasn’t stopped the diamonds piling up, spreading concern in the industry about how the inventories will eventually be wound down.
Still, De Beers, which is owned by Anglo American Plc, is sticking with its plan to produce between 25 million and 27 million carats this year, although the target is “subject to continuous review based on the disruptions related to COVID-19, as well as the timing and scale of the recovery in demand.”
Alrosa said Thursday that its stocks of diamonds now stand at 26.3 million carats, almost equivalent to its full-year production target of between 28 million carats and 31 million carats.
The outlook for the second half remains uncertain, “given the situation with COVID-19 in the U.S. (50 per cent of demand), and in India where the key diamond processing hub Surat has closed again to contain the virus,” Morgan Stanley said in a report Thursday.
Alrosa “has previously flagged a Q3 recovery, but we think this could be pushed back.”