The weaker diamond market has prompted mining giant Anglo American, which owns De Beers, to cut its forecast for annual diamond production.
Anglo lowered its 2015 production guidance for diamonds to 30m-32m carats from 32m-34m carats, citing current trading conditions. The 7-8% downgrade came after diamond production increased by 2% to 7.7m carats between January and March – traditionally the weakest quarter. It was a little weaker than normal, which prompted Anglo to tweak its full-year estimate, a spokesman explained.
He said: “Demand has been off a bit and you don’t want to overproduce.”
After rising for five years, diamond prices have weakened in recent months amid a supply glut and slowing demand in China. Pro-democracy protests in Hong Kong last autumn also hit diamond sales to locals and Chinese tourists.
But miners take comfort from the fact that the US remains the biggest market for polished diamonds and its economic recovery is gathering steam.
Diamonds have become increasingly important to Anglo since it took over De Beers, the world’s largest diamond miner, in a $5.1bn deal in 2011. Its diamond division ramped up production last year to take advantage of rising prices and overtook copper to become the second-biggest contributor to group profits, behind Anglo’s main iron ore business. Diamond profits rose by more than a third to $1.4bn in 2014 while underlying group earnings dropped by a quarter, as prices of other commodities such as iron, copper and coal dived.
Anglo’s De Beers division raised its profile by opening a new store in Selfridges in London last year and a concession in Saks Fifth Avenue in New York, taking the number of De Beers stores to 35 worldwide. However, the company’s diamond business makes the bulk of its profits from selling rough stones.
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