Diamond slowdown concerns De Beers
Diamond producer De Beers boosts marketing expenditure in China to prop up growth and lure new consumers.
|||Hong Kong - De Beers SA, the world’s biggest diamond producer, is banking on Chinese generosity to help reverse a sharp slowdown in the country’s demand for jewels.
“We’ll push behind the big occasions, so weddings and anniversaries, which are becoming an increasingly important occasion for gift-giving in China,” Stephen Lussier, executive vice president, said in an interview on Tuesday in Hong Kong. “We see the gift market as more important and interesting than self-purchasing.”
Prices for rough diamonds have slumped about 15 percent this year as Chinese demand growth has shrunk amid an economic slowdown, stock market turmoil, and an anti-corruption campaign that’s stifled purchasing of luxury goods. De Beers is boosting expenditure on marketing in China to prop up growth and attract new consumers, targeting women between the ages of 18 and 29, and buyers in third- and fourth-tier cities.
Growth in China’s less developed cities in inland provinces will be much stronger than in areas that already have mature diamond markets like Beijing or Shanghai, Lussier said.
China’s diamond jewellery market grew six percent in 2014, amid a rapid expansion of stores across the nation. That has slowed to three or four percent this year, he said, forcing world producers to cut prices and pare production.
“The big jewellery chains have still added stores this year, but their desire is to take a pause in expansion,” Lussier said. “The overall network will remain the same size but they will make some smart decisions about where they want their stores, rather than this dash to get everywhere.”
Sales volumes of polished diamonds in China grew an average of 18 percent a year from 2009 to 2014, according to De Beers, and the country now accounts for 13 percent of the world diamonds market.
Engagement rings already account for about a 10th of jewellery spending in China, the same as the US, according to Alan Davies, chief executive officer of diamonds and minerals at Rio Tinto.
“It’s moved from almost zero 10 years ago,” Davies said in an interview in Hong Kong on Monday. “It isn’t part of the tradition in China, but it’s becoming much more so.”
The excess inventory of diamond jewellery built up last year should “burn off” by the middle of 2016, Davies said.
BLOOMBERG