De Beers curbs diamond supply as earnings drop

Diamonds are displayed during a visit to the De Beers Global Sightholder Sales (GSS) in Gaborone, Botswana November 24, 2015. (Reuters/File Photo)
Updated 25 July 2019

De Beers curbs diamond supply as earnings drop

  • De Beers CEO Bruce Cleaver cited a range of factors in an interview
  • Trade tensions between the US and China contributed to a 27% first-half fall in diamond earnings

LONDON: Anglo American’s diamond subsidiary De Beers is scaling back production after trade tensions between the US and China contributed to a 27% first-half fall in diamond earnings, its CEO said.
De Beers CEO Bruce Cleaver cited a range of factors in an interview, including trade tensions, the US government shut-down that ended in January and Hong Kong anti-government protests, which he said had left the diamond market in a state “not dissimilar from 2014-15.”
The diamond market was weak in 2014-15 in the run-up to a deep commodity price fall linked to declining Chinese demand for raw materials.
“A nasty cocktail is affecting the mid-stream, with too much polished (diamonds), financial pressure from the banks and a slow down in demand for jewelry,” he said.
But demand was still expected to grow in the US market, the world’s biggest, meaning stock levels should become more balanced in the second half of the year, Cleaver said.
De Beers is working with its customers and limiting supply, the company said. In the first half it reduced rough diamond production 11% year-on-year.
While the diamond division fell, Anglo American on Thursday reported a 19% increase in overall first-half underlying earnings before interest, tax, depreciation and amortization (EBITDA), largely because of high iron ore prices.
The group cites future diamond demand as one of the principle risks it faces.
De Beers has been fighting competition from laboratory-grown diamonds by producing its own synthetic diamonds from its Element Six subsidiary at a lower cost than peers.
The impact had been to reduce overall wholesale prices for laboratory-grown diamonds by around 60%.
Cleaver said De Beers was still working to eliminate what he said was customer confusion concerning the difference between mined diamonds and those produced in laboratories.
De Beers is banking on a long-term future for natural diamonds and is investing $468 million in a new vessel to mine diamonds off the coast of Namibia.
Cleaver said the project was on track to add an estimated 500,000 carats per year from 2022.


Oman said to mull new regional airline

Updated 4 min 42 sec ago

Oman said to mull new regional airline

DUBAI: Oman is considering setting up a new regional airline that could take over domestic operations from state carrier Oman Air, two sources familiar with the matter told Reuters.

A request for proposal was issued this month by state entity Oman Aviation Group for a feasibility study into operating the new airline, “Oman Link,” the sources said.

Setting up a new airline for domestic flights would allow Oman Air to focus on its international network where it competes with large Gulf carriers Emirates, Qatar Airways, and Etihad Airways.

The new airline could partner with Oman Air with both carriers connecting passengers to each other but would have its own independent management, the sources said on the condition of anonymity because the details are private.

Proposals are to be submitted by Nov. 11, one of the sources said.

The new airline would use regional jets for domestic flights and potentially later to other cities in the region where there is not enough demand to fill the larger single aisle jets used by other airlines in Oman.

FASTFACT

Oman Air operates flights to four airports in the country, including the main Muscat International.

Oman Aviation Group and its unit Oman Air did not respond to separate emailed requests for comment.

Oman Air operates flights to four airports in the country, including the main Muscat International, according to its website.

The airline uses 166-seat Boeing 737 jets and 71-seat Embraer E175 aircraft on domestic and regional flights.

Both aircraft types are too costly to consistently operate domestic routes at a profit, according to industry sources.

Oman has been restructuring its aviation sector in recent years. Oman Aviation Group was formed in 2018 and includes Oman Air, Oman Airports and Oman Aviation Services.

A budget, second airline, Salam Air, was launched in 2017. It is owned by Omani government pension funds and the Muscat municipality.

Last week, Eithad and Air Arabia said they were jointly setting up a low cost carrier in Abu Dhabi.