Diamond majors De Beers, Alrosa sit on billions of dollars worth of unsold stock as coronavirus freezes industry
- The world’s five biggest gems producers are probably sitting on excess inventories worth about US$3.5 billion
- De Beers and Alrosa stay put on prices and have reduced output in a bid to control stock levels
In one of the world’s biggest diamond vaults, hidden inside a nondescript office compound on the dusty outskirts of Botswana’s capital, the precious stones just keep piling up.
Owner De Beers, which mines and auctions most of its gems in the southern African nation, has barely sold any rough diamonds since February. Neither has Russian rival Alrosa. Now, as the coronavirus restrictions that froze the global industry for months begin to lift, the unsold diamonds present a dilemma: how to reduce billions of dollars’ worth of stocks without undermining the nascent recovery.
The pandemic has devastated the diamond world. Jewellery stores closed their doors, India’s cutting and polishing artisans were forced to stay home and De Beers had to cancel its March sale because buyers couldn’t travel to view the merchandise.
De Beers and Alrosa have moved to defend their market. The miners refused to cut prices, instead allowing buyers unprecedented freedom to renege on contracts to buy stones. They’ve also reduced production in an effort to control stock levels. Yet the diamonds keep piling up.
The five biggest producers are probably sitting on excess inventories worth about US$3.5 billion, according to Gemdax, a specialist advisory firm. The figure could reach US$4.5 billion by the end of the year, or about one-third of annual rough-diamond production.