The slowdown in economic growth has even forced diamonds—“forever enduring”—to give way.

De Beers Group, the world's largest diamond producer (De Beers) In the 2015 The “Diamond Industry Analysis Report” points out that, under the combined influence of China’s slowing economic growth and a strengthening U.S. dollar, global demand for diamond jewelry may halt its growth this year and remain at last year’s level.

“There’s no doubt that the slowdown in China’s economic growth has hit midstream companies in the industry hardest. At the very beginning of the economic slowdown, they were still continuing to stockpile inventory,” said De Beers Group Executive Vice President and Eternal Legacy, in an exclusive interview with First Finance Daily. (Forevermark) Chief Executive Officer Stephen Luchier (Stephen Lussier) It was noted that, in the downstream consumer market, sales for the first half of this year remained roughly on par with last year’s levels. “The global economy—especially China’s economic growth—has slowed down, but it’s still growing and hasn’t decelerated.”

Demand for rough diamonds is low.

Last year, the entire diamond industry was still immersed in the euphoria of a surge in demand. 2014 This year marks the fifth consecutive year that the industry has seen growth in diamond jewelry sales, and global diamond jewelry sales have surpassed the milestone for the first time. 800 hundreds of millions of dollars, accounting for global demand 75% All major markets showed growth. Sales of rough diamonds exceeded 200 hundreds of millions of dollars, with an increase as high as 12%。

But now, even De Beers has had to confront the reality of shrinking demand. Several months ago, De Beers announced that it was lowering its production target for this year from... 3000 Ten thousand to 3200 Ten thousand carats reduced to 2900 Ten thousand to 3100 Ten thousand carats.

“Our customers’ demand for rough diamonds has declined, and we’re now experiencing an imbalance between the consumer market and the rough diamond market,” Lushir admitted. Until the two markets regain equilibrium, De Beers will adjust its production to align with customer demand.

Apparently, the diamond industry had been slightly overly optimistic in its earlier expectations of an economic slowdown.

Last year, accounted for the global total consumption. 75% The five major markets for diamond jewelry are all showing a growth trend. Although the U.S. is the most mature market, it still achieved... 7% The increase, China and India respectively have 6% and 3% the growth rate. The number of jewelry retail stores in Asia’s developing markets continued to... 2013 The growth trend for the year continues, though the pace has slowed slightly.

“When China was experiencing rapid growth, jewelers were all expanding and opening new stores, and midstream companies were heavily purchasing diamonds to support the business expansion of downstream players. But even as economic growth began to slow down, they kept on buying,” Luhir said. Suddenly, jewelers no longer needed as many diamonds—or at least not as many as they had thought they would need—leading to a sharp increase in inventory held by intermediaries.

The aggressive strategies of midstream companies have brought substantial benefits to upstream De Beers. Last year, although sales in the consumer market saw only a modest year-on-year increase— 3% However, De Beers had a record-breaking year, with rough diamond sales increasing year-on-year. 12% To 65 Hundreds of millions of dollars, with growth far exceeding that of the consumer market.

“From the first half of the year until now, the entire industry has been in the process of reducing inventory. Only once these inventories are completely depleted will we likely see a recovery in market demand for rough diamonds,” Lu Xi’er pointed out. However, the good news is that consumer demand for diamonds in the retail market remains strong, and the midstream diamond inventories will eventually be depleted.

The industry hopes for the past. 20 The Indian market, which has been experiencing nearly continuous growth year after year, offers even more opportunities. De Beers’ report forecasts that in the future... 10 There will be... within the year. 7500 Ten thousand new Indian households have seen their incomes rise to... 5000 To 6000 The U.S. dollar is conducive to boosting the growth in diamond demand.

Affected by inventory reductions in the midstream sector, De Beers’ earnings before interest and taxes fell year-on-year in the first half of the year. 25% As a result, the target production volume has also decreased accordingly. However, prices have risen year-on-year, benefiting from the higher quality of the diamonds produced. 7%。

“Actually, prices are somewhat soft right now, but we’re lucky to have discovered high-quality diamonds. However, it’s uncertain whether we’ll continue to find diamonds of the same high quality in the future—even within the same mine, output can vary dramatically from one location to another. You’ll never know exactly what kind of diamonds you’ll encounter next,” Lushil admitted frankly.

Farewell to the Kimberley Mine

As the leader in upstream diamond mining and midstream trading, De Beers has since... 1888 The mine, established years ago and located in Kimberley, South Africa, was the very first diamond mine developed by De Beers. Today, the Kimberley mine is also facing the prospect of being sold.

“We are currently in the process of accepting bids, and we already have several interested bidders. However, we haven’t set a deadline yet and hope to finalize the deal by the end of this year or early next year,” said Luchir. De Beers hopes to find a successor who can continue to support the community, and the amount of the bid isn’t the most important factor.

The Kimberley mine has been in operation since its inception. 127 Years of history, in the past 10 Over the past year, the Kimberley mine has ceased new mining operations and is instead reprocessing the waste ore left over from initial mining using advanced new technologies to extract small diamonds.

“When a mine gets older and its remaining lifespan dwindles to just a few years, we start considering selling it—this is precisely the situation with the Kimberley Mine,” Luchir admitted frankly. He emphasized that the decision to sell the Kimberley Mine had nothing to do with current market conditions.

Last year, through the reprocessing of waste ore, the Kimberley mine produced a total of 72.2 A diamond worth ten thousand carats. “For a large group like De Beers, we need substantial output. In fact, whether or not we sell the Kimberley mine makes almost no difference to us—after all, the mine’s current output accounts for less than one percent of our total production.” 1% “De Beers hopes to eventually sell the mine to a local group, allowing the Kimberley mine to continue operating for several more years,” Luchir said.

Besides the oldest Kimberley mine, De Beers’ diamond mines are mainly located in Botswana, Canada, Namibia, and South Africa. Luchir said that currently, the mines with the highest production are those in Botswana and the Venetia mine in South Africa; next year, De Beers will add a new mine in Canada.

“This year, the reduction in production is mainly affecting several large mines—especially the decline in output from the mine in Botswana—but we’re not going to shut down that mine,” Luhir admitted.

The worst may already be over.

In the first half of the year, the luxury goods industry—particularly those actively expanding into the Chinese market—experienced an unforgettable nightmare, and diamond jewelry was no exception.

“The slowdown in China’s economic growth has had a significant impact on us. Overall, women’s products have been less affected, but when the economy slows down, people tend to become more cautious in their spending,” said Luhir.

Right now, De Beers jewelry in the high-end segment is available in Hong Kong. 3 Branch stores, located in Macao 2 With fewer mainland tourists visiting the city, these stores have been performing rather lacklusterly. “Macao’s consumer base is a bit thin,” Lu Xir said with a wry smile. The newly opened store at Galaxy Entertainment in Macao had seen far fewer customers than anyone could have anticipated when it first opened.

However, when the scope is broadened to a global level, De Beers jewelry sales have not been severely impacted. “Hong Kong has lost some of its wealthier mainland tourists, but this hasn’t posed a major challenge for the luxury goods industry—Chinese tourists continue to spend heavily in Europe, Japan, and other regions. De Beers jewelry performed well overall in the first half of this year, largely thanks to Chinese tourists’ shopping sprees around the world; revenue at its Paris stores grew strongly,” said Luchir.

Eternal Impression, a brand deeply rooted in the wedding and marriage market, has been relatively less affected. Lu Xiru noted that despite an overall downturn in the jewelry industry, Eternal Impression’s performance in Hong Kong during the first half of this year remained roughly flat compared to the same period last year. 8 Monthly sales volume achieved year-on-year growth. 16%。

“This is our past.” 8、9 For the first time in months, Hong Kong is experiencing strong growth. We hope the worst is over—but of course, we’ll have to wait and see what the future holds. 4 “Over the past few months,” Luchir said, “De Beers will continue to implement its development plan in mainland China. This year, Eternal Mark has already achieved its full-year development targets ahead of schedule and may even outperform its original plans.”

“The industry clearly still needs to further reduce inventory levels. But the good news for us is that we’re approaching the peak consumption period of the year—major holidays in India, China, and the U.S. are just around the corner, and we’ll be significantly ramping up our marketing investments.” Lu Xi told us frankly that if performance during this period turns out to be strong, retailers will likely feel compelled to increase their inventories in the first quarter of next year. “Our focus isn’t on this year’s sales; we’re still taking a fairly cautious approach to this year’s results.”