Gem giant to shock market: De Beers payout in jeopardy as destocking in Japan and lack of demand cut sales by 15%

THE FRAGILE confidence of the world diamond industry will be shaken this week when De Beers, which controls over 80 per cent of the market through its London-based Central Selling Organisation, reveals that sales fell more than 15 per cent last year and will remain depressed.

De Beers will also disclose no let-up in the problems affecting the industry, which also threaten its own dominance, a position it has enjoyed since the 1930s.

The CSO figures, due on Wednesday, will show that sales fell from dollars 3.93bn (pounds 2.6bn) in 1991 to about dollars 3.25bn last year. This will mark the second annual decline and analysts are expecting De Beers to add to the gloom with a bearish forecast for this year, predicting only a marginal recovery in fortunes.

De Beers has already had to impose a 25 per cent cut in production on diamond producers selling through the CSO, and has indicated it might make a dividend cut for only the second time in its history.

The company's woes have been compounded by illicit diamond mining in Angola and the failure of Russia and Sakha, the new independent republic in former Siberia, to finalise a new supply deal with the CSO.

The main problem, though, has been a fall in world demand. The recession has gradually hit the CSO's main markets with the downturn in Japan and a sharp destocking by Japanese jewellers bringing about the latest collapse.

Steve Oke, mining analyst at Smith New Court, says the Japanese market is still declining. The only ray of hope is from the US, although recovery there is still weak.

In Angola, renewed fighting in the long-running civil war is good news for De Beers. Last year, about pounds 500m of diamonds were illegally mined during lulls in the fighting - twice the official production of the country.

Mining has since stopped during the outbreak of war, but any pause could mean that Angolan gems will start flooding back onto the market.

Russia is also uncertain. The parliament has yet to fully ratify a new agreement under which the CSO will sell all Russian and Sakhan diamonds until 1995. The Russians also want to set up as many as 15 new diamond-cutting centres which could bring down the price of cut gems.

Reports from Antwerp, one of the main diamond cutting centres, indicate a still subtantial flow of diamonds coming from Russia and not being sold through the CSO.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent