According to Liberum Capital Markets, the crisis with the diamond industry will not end soon.
During the year we received very little positive news about the business. The glut of the diamond and polished stones market, as well as the steady fall in prices, continues to put pressure on companies in both directions, both in the miners and in the miners, until the very end of the year. and sell.
Ben Davis, an analyst at Liberum, says “the diamond market is going through one of its worst years.” He said: “Although there is some optimism about reducing mine output and stopping glut that will revive diamond prices, I think the 2020 H2 will remain difficult for businesses.”
Excessive saturation of the diamond market and lack of funding from banks hurt traders’ profits. They also currently have excess inventory that loses value and the liquidity of this commodity decreases.
The effects of over-supplying and cheaper stones are being felt throughout the industry. Smaller mining companies such as Gem Diamonds, Lucara Diamond and Petra Diamonds are reporting permanent losses, and major manufacturer De Beers has taken counter-measures to these impacts.
De Beers offers more flexibility to its customers, allowing them to opt out of some of their diamonds, and last month they cut prices by 5%. The company also spends more on advertising to drive consumption.
According to Davis, however, more measures will be needed to revive consumption. Especially if the jewelry business comes to life and lab-produced diamonds also reduce their competitive output.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
Trader Martin Nikolov