De Beers sees tough outlook as critical holiday sales approach
By Farah Master and Donny Kwok HONG KONG (Reuters) - Anglo American owned De Beers, one of the world's largest diamond producers, expects some growth in the consumer market next year but its chief executive warned the overall sales environment is likely to remain tough Bruce Cleaver, who was appointed to head De Beers in May, said prices had stabilized for rough diamonds, while the polished diamond market looked set to be flat "We think there will be some growth in the consumer market next year, but probably not hugely significant given some of the economic factors and political factors in the world," said Cleaver. De Beers is heading into the important holiday sales period for diamond jewelry including the Diwali festival in India, Christmas and then Chinese New Year. Anglo American, which has an 85 percent stake in De Beers, has set diamonds, precious metals and copper at the core of its restructured portfolio as it seeks to recover from a commodities rout. De Beers has been hit by waning demand and slumping prices after global demand for diamond jewelry hit a high of $81 billion in 2014 and production soared, leaving the market flooded by 2015. "The diamond market is in much better balance than a year ago," said Cleaver, who was in Hong Kong to launch the De Beers 2016 Diamond Insight Report which focuses on demand from customers in the millennial generation, aged roughly 18-34. The diamond market in China has been unwinding extensive inventories built up last year. De Beers, which now has around a 30 percent share of the market for genuine rough diamonds, has seen its market share fall from over 80 percent in the 1980s, ceding its control over supply and unleashing price volatility. The company's challenges have been compounded by competition from synthetic diamonds, which sell for about 30 percent less than the real thing. De Beers has a unit that makes synthetic diamonds, but only for industrial usages, such as drilling and cutting. All the rough diamonds De Beers sells for jewelry are real. De Beers is set to officially open the Gahcho Kue diamond mine in Canada's Northwest Territories next week with 49 percent owner Mountain Province Diamonds Inc. Cleaver said there were no plans at present to increase De Beers stake in the project, which has a projected annual output of 4.5 million carats. As far as broader acquisition targets go, Cleaver said the company would continue to monitor potential opportunities but were very comfortable with their portfolio at present. The growth outlook for China and India is the key focus for De Beers in the long to medium term, with the company focusing on increased marketing to help drive sales amongst new and wealthy aspiring customers. "There is a huge opportunity for us for the mid stream and for retailers if we get China right," Cleaver said. (Reporting by Farah Master and Donny Kwok; Editing by Ed Davies)
