If anyone needed proof that last year wasn't all that good:
JOHANNESBURG (miningweekly.com) – Diamond giant De Beers on Thursday reported an underlying loss of $220-million for the 2009 financial year, compared with profit of $515-million in 2008, with the global recession hitting the diamond sector hard.
The world’s number-one gem producer said that sales had nearly halved, from $6-billion in 2008 to $3,8-billion last year.
De Beers slashed its production in early 2009 in a response to weaker demand, said it had gradually increased its output from the second quarter. The company produced 24,6-million carats in the full year, which was 49% below the production in 2008.
De Beers stated that it would take a “cautious and prudent” approach to production and sales levels for 2010, adding that it expected only a gradual increase in output, sales and prices.
High stock levels throughout the diamond pipeline, constricted liquidity in the industry and lower levels of retail and consumer demand, led to substantially lower demand for rough diamonds.
Global demand for diamond jewellery declined to the low single digits, although the fourth quarter showed an improved and positive trend on 2008.
De Beers said it is expecting US Christmas sales trading results to show the first year-on-year increases since September 2008, adding that demand remained strong in the developing markets of India and China.
“2009 presented some of the most challenging trading conditions the diamond industry has experienced. However, as a result of De Beers’ actions, our clients have been able to reduce inventory and debt levels, and with better-than-expected consumer sales in the fourth quarter, sentiment has improved markedly from a year ago,” the miner said.
Demand for rough diamonds has also been much improved at the first sight of the year, and expectations were for this to continue in the upcoming February sight.
“Consumer demand for diamond jewellery is beginning to recover, driven in part by the strength of the developing markets of China and India. However, with the fragility of the world economy and perceived weakness of the global recovery post recession, the company would only expect a gradual increase in production levels, sales and prices.”
Desire for diamonds remains strong and De Beers noted that given the improvement of industry fundamentals, the company was “cautiously optimistic” about medium-term prospects.
In the longer-term, the fundamental supply-and-demand dynamics of diamonds remained “highly attractive”.
“Future demand growth for diamond jewellery, driven by the emerging markets of China and India, was expected to outpace what was forecast to be lower levels of diamond supply for several years to come, providing a sound foundation for future profit.”
Edited by: Mariaan Webb
