Global diamond sales collapse in wake of Covid-19
The diamond industry has emerged as one of the biggest commercial casualties of the Covid-19 pandemic. The two largest producers of the precious gems, De Beers and Russia’s Alrosa, reported their 2020 second-quarter sales on Thursday. Their combined sales were $130m, a staggering 94% fall from $2.1bn a year ago.
The diamond industry has been hit by a perfect pandemic storm.
Jewellery stores, regarded as “non-essential”, have been closed, cutters and polishers have been stranded at home and cannot ply their trade remotely, and social events, such as weddings, which often feature diamonds, have been postponed.
Travel restrictions also prevented dealers from accessing the “sights” – sales events where rough diamonds are purchased. On top of that, the global economy has contracted sharply, sucking a lot of disposable income out of households and crushing consumer confidence. People everywhere still need to buy staples such as bread, rice and maize. But diamonds, not so much.
“During Q2, the demand for rough diamonds was significantly impacted by a combination of Covid-19 restrictions impacting consumer demand and access to southern Africa, as well as severely limited midstream cutting and polishing capacity due to lockdowns, particularly in India,” De Beers’ parent company, Anglo American, said in its production report for the quarter.
“The third sight of 2020 was cancelled due to Covid-19-related travel restrictions and, in response to the unprecedented industry conditions, De Beers also offered Sightholders the option to defer up to 100% of their allocations at the fourth and fifth sights. Rough diamond consolidated sales in Q2 2020 decreased to $56-million (Q2 2019: $1.3-billion), driven by lower volumes and prices.”
So sales effectively dried up. Alrosa also reported a virtual collapse in sales.
In southern Africa, this bodes ill for Botswana, the world’s No 2 diamond producer after Russia. Its central bank said this week that it sees Botswana’s economy contracting by 8.9% this year while its budget deficit is set to soar on weak diamond sales, which have come on top of the implosion of its wildlife safari industry catering to international tourists.
Still, Anglo American said its full-year diamond production guidance remained unchanged at 25-27 million carats “subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand”.
The pandemic, unlike a diamond, is not expected to last forever. BM