Diamond sales plummeted 44 per cent at De Beers’ latest auction in Botswana, as the industry struggles with weaker consumer spending and the rise of lab-grown stones.

The world’s largest diamond miner said on Wednesday that sales of rough diamonds were $280m at last week’s auction compared with $503m in the same period a year ago.

The sharp decline follows another weak auction last month. So far this year, at $2.9bn, De Beers’ diamond sales are 26 per cent lower than the $3.9bn recorded at the same time last year. In July, Russian diamond producer Alrosa reported a 51 per cent fall in diamond sales.

“The current malaise in the market is due to oversupply,” said Paul Ziminsky, an analyst in New York, who said diamond buyers had too much inventory.

Macroeconomic uncertainty and, in particular, the trade war between the US and China, the world’s two largest diamond-consuming countries, has fuelled nervousness among wholesalers and retailers.

Diamond buyers, who polish and cut diamonds for retailers, are struggling to make money this year due to lower prices and tighter credit, prompting them to delay purchases.

Tiffany’s on Wednesday reported a 3 per cent decline in like-for-like sales, with the luxury retailer’s chief executive Alessandro Bogliolo warning that unrest in Hong Kong was “taking a toll on our business”, as did a drop in Chinese tourists visiting the US.

Shares in Signet, the world’s largest retailer of diamond jewellery, have fallen more than 60 per cent this year.

Increased sales of lab-grown diamonds, which are chemically identical to traditional stones, are also “taking a very precious piece of the mined industry’s modest growth”, noted Mr Ziminsky.

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De Beers has responded by cutting production — with a target of 31m carats this year compared with 35.3m lin 2018 — and pledging to increase the amount of money it spends on marketing diamonds.

Anish Aggarwal, a partner at consulting firm Gemdax, said short-term economic worries and long-term fears of lab-produced stones were being aggravated by retailers shifting to a “just-in-time” stocking model.

De Beers, which made up around 10 per cent of Anglo-American’s earnings in the first half of this year, sells most of its diamonds to approved customers at 10 “sights” a year in Africa.

As an incentive to buyers, at the latest auction it increased the amount of stones customers were allowed to reject in each lot purchased from 10 per cent to 20 per cent, according to people familiar with the auction.

Via Financial Times