De Beers has amassed the largest diamond stockpile since the 2008 financial crisis

Open the editor’s digest for free

FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.

De Beers Group amasses its largest diamond stockpile since the 2008 financial crisis, challenging the group’s resurgence in demand for jewelery once seen as the pinnacle of luxury.

Declining Chinese demand, intensifying competition from lab-grown alternatives and the legacy of the pandemic’s lockdowns, while declining marriages, have cost the world’s largest diamond producer nearly $2 billion in revenue.

The previously unreported amount of the stock hovers around $2 billion a year, the company said.

CEO Al Cook said: “It’s been a bad year for rough diamond sales.

A long-term decline in demand triggered by the Covid pandemic has forced it. de beers To take measures to curb the supply of precious stones. Production from the mine has fallen by about 20 percent from last year, and it has cut prices at auctions this month.

Auctions are used to sell rough, or uncut, diamonds to a group of about 50 certified buyers who are the most powerful dealers in the industry.

With a workforce of 20,000 strong, De Beers has been a dominant force in the $80 billion diamond jewelry market since its founding in the late 19th century. The group’s revenue fell to $2.2 billion in the first half of this year from $2.8 billion in the same period in 2023.

Her biggest competitor was Russia’s Alrosa. Hit by restrictions In the year Following the general invasion of Ukraine in 2022, it was thrown on the Russian diamond by the G7 nations.

The struggle in the diamond market came as De Beers was about to be merged into a separate company by its owner, Anglo American. The FTSE 100 mining group has vowed to offload De Beers after it rejected a £39bn takeover bid from rival BHP this year.

Anglo chief executive Duncan Wanblad warned that disposing of De Beers, whether through a sale or an initial public offering, could be complicated by the weak diamond market.

De Beers in an effort to increase sales The marketing push has begun. In October, he focused on “natural diamonds”, echoing the popular advertising campaigns of the second half of the 20th century.

Cook, who will lead De Beers from February 2023, said the group would increase investments in advertising and retail, including increasing its network of stores to 100 globally, as it prepares for the launch.

“The relaunch of this massive category marketing campaign . . . I think this is an early indicator of what independent De Beers will look like,” Cook added.

“When we go independent, we have the freedom to focus on marketing as much as we focus on mining,” he said. Even though we’ve reduced capital and spending on the mine, I feel like this is the right time for me to drive marketing and carry from our brands and retailers.

This year, the high demand in China has become a major driver. Imports are typically a sign of market weakness. Diamondsthe country’s jewelers are exporting polished stones to reduce their own stocks.

Competition for laboratory diamonds, which are about one-twentieth that of natural stones, has grown, especially in the United States. The country is the world’s largest diamond market, accounting for nearly half of the industry’s sales.

Cook insisted that next year would bring a “gradual recovery” globally, including in the United States.

“We’ll see emerging signs of a retail recovery[in the U.S.]in October and November,” he said, pointing to credit card data that showed strong growth in jewelry and purchases this month.

Independent industry analyst Paul Zimnisky said De Beers’ rough diamond sales were down about 20 percent this year after falling 30 percent in 2023.

“If we get the low base, any recovery in the business should lead to some relative growth in 2025,” he said, adding that he expects global diamond jewelry sales to rise 6 percent to $84 billion next year.