De Beers’ diamond price cut to set benchmark for broader market — experts

MOSCOW, July 8. /TASS/. De Beers’ decision to cut diamond prices amounts to a capitulation to market conditions and is likely to put additional pressure on Alrosa by setting a benchmark for further price declines across the industry, experts interviewed by TASS said.

"The main reason behind De Beers’ price cut is its capitulation to the market. For years, the company kept its official prices 5% to 50% above the secondary market while quietly offering discounts to selected clients to avoid openly undermining market sentiment," Finam analyst Egor Vershinin told TASS.

According to him, after sharply reducing the number of companies eligible to buy rough diamonds directly, De Beers has, for the first time, openly and significantly cut prices across nearly all categories, marking a break with its long-standing policy of artificially inflated pricing.

"Such moves weigh on market sentiment. De Beers and Alrosa have historically moved in tandem, and a step by a producer accounting for roughly 25% of global diamond output sets a benchmark for further price declines across the industry," Vershinin added. He noted, however, that the decision would not directly affect Alrosa’s sales because Western markets remain closed to the company due to sanctions.

Eduard Lysenker, partner at S+Consulting, said the main reason behind De Beers’ decision was the collapse in demand for traditional small and medium-sized diamonds due to rising production of synthetic stones, as well as the crisis in India’s diamond-cutting industry and weakening global jewelry demand.

"Companies such as Alrosa could benefit from a shortage of large stones, as its sales strategy is focused on the premium segment. At the same time, De Beers’ price cuts for mass-market categories create additional pressure on the company, since cutters focused on lower-priced stones will seek similar concessions from all suppliers," he said.

Meanwhile, Boris Krasnozhenov, head of equity market research at Alfa Bank, believes De Beers had most likely simply aligned its list prices with actual transaction prices, while its clients made the revision official in an effort to push other suppliers to lower their prices as well. "This may be one of the last price cuts before the market rebounds, at least seasonally. From late August to early September, the diamond market typically begins to recover ahead of Christmas orders and the Chinese New Year," he said.