JOHANNESBURG: Mining titan Anglo American announced Tuesday it planned to sell off the world’s long-dominant diamond supplier De Beers, with analysts pointing to pressure from cheaper lab-grown stones and volatile consumer demand.
De Beers was founded in 1888 by the British colonial figure Cecil Rhodes and has long dominated the trade in diamonds from southern Africa, from mining right through to jewellery sales.
The company has since 2011 been majority-owned by mining giant Anglo American, while the government of Botswana holds a 15 percent stake in the firm which lies at the heart of its economic strategy.
Lab-grown diamonds put natural gems under pressure
But on Tuesday, Anglo-American announced that it planned to split or sell off its diamond operations as it fights off a huge takeover bid by its Australian rival BHP.
Diamonds may be a luxury commodity associated with engagement rings and crown jewels, but Anglo American is betting that less glamorous iron and copper will provide a more secure path to growth.
De Beers’s CEO Al Cook put a brave face on the decision, promised a new strategy and vowed: “I am confident that we will remain the diamond leader for the next century.”
But industry experts told AFP Anglo American’s decision reflected a diamond market facing competition from lab-made gems and a downturn in consumer spending, particularly in China.
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Paul Zimnisky, an independent diamond industry analyst based in the United States, calculates that prices have fallen 25 to 30 percent since a high in the first quarter of 2022.
“There was highly unusual volatility in diamond demand over the last four years,” he told AFP.
Diamonds fared better than many luxury products during the COVID epidemic, as even wealthy consumers were forced to avoid travel or high-end dining, even as stimulus spending boosted markets.
But in the post-pandemic epidemic diamonds have not bounced back as quickly as some commodities.
Lower price
Experts cite several reasons for this. The rise in lab-made diamonds as a cheaper alternative to the gems mined by De Beers in Botswana has cut into the cheaper end of the market.
“I estimate lab-diamond jewellery represented less than one percent of the global diamond jewellery market a decade ago,” Zimnisky said.
“Today it is pushing 20 percent-plus. Consumers have been drawn to the much lower price point of lab diamonds, which can be upwards of 90 percent less than an equivalent natural diamond.”
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Another issue is depressed demand in China, the world’s second biggest diamond consumer after the United States, where consumer spending has yet to rebound post-crisis.
Edahn Golan, another leading diamond industry consultant, said it may have been “short-sighted” for Anglo-American to turn its back on De Beers so soon after buying a majority stake.
US consumers, he argues, see the lab-grown diamonds as the cheaper entry-level product and aspire to eventually buy mined diamonds.
In any case, diamonds retain their symbolic value as engagement rings and always bounce back.
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