Diamond miners are in dire straits. The $90bn market is being squeezed by demand and supply problems and faces a long-term threat from manufactured gemstones.
Industry giant De Beers sold 12% fewer stones at its most recent sale compared to a year before, says Alexandra Wexler in The Wall Street Journal. Operating earnings at the Anglo American subsidiary fell to $518m in the first half, down 27% compared with the previous year.
A slowing global economy and US-China trade tensions have weighed on luxury demand. Tighter lending conditions in India, "where most diamonds are cut and polished", has also disrupted the supply chain.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The "diamond midstream", the middlemen linking those who dig the stones out of the ground to those who sell them in the world's global cities, "is being squeezed like rarely before", agrees Thomas Biesheuvel on Bloomberg. The industry is so oversupplied that De Beers cut its prices for the stones by 5% across the board last month.
Mid-cap diamond-miner misery
The industry also faces a longer-term threat from the rise of lab-grown diamonds, which are chemically identical to mined stones and about 40% cheaper. They are also perceived as more ethical by some consumers because of concerns about "blood diamonds" and the environmental impact of mining. Although manufactured stones still only account for about 3% of the rough diamond market, it is a growing sector and "synthetic diamond exports from India are exploding", says Ben Davis of Liberum Capital Markets.
Mid-cap diamond miners are at a low point, but value investors should tread carefully, says Hamer. Given the inauspicious outlook further pain could be on the way. Make sure the miners "are actually recovering before buying in".
It's not all bad, notes Edward Thicknesse in City AM. While overall diamond prices are weak, a single big find can still mean a tasty, albeit unpredictable, profit. Just take Petra Diamonds, which last month "sold a 20.08 carat blue diamond" found in South Africa for $14.9m (£11.4m). It's always good to stumble upon a "diamond in a rough year".
-
Renewable investing: who is paying for the green revolution?Investors in renewables have not been rewarded, says Bruce Packard. Will they fund the government’s plans?
-
UK house prices rose 4.6% last year – where did property prices grow most?House prices increased by 4.6% in 2024, giving an average property price of £268,000. Where did property prices grow the most and will they continue to rise this year?
-
These 2 stocks are set to soarTips The returns from these two aluminium and tin stocks could be spectacular when the commodity cycle turns says David J Stevenson.
-
A lesson for investors from a ill-fated silver mineAnalysis Mining methods may have changed since the industry’s early days, but the business hasn’t – digging ore from the ground and selling it at a profit. The trouble is, says Dominic Frisby, the scams haven't changed either.
-
The natural resources industry is in a tight spot – which is bad news for the rest of usOpinion The natural resources industry is in a bind. We need it to produce more energy and metals, but it has been starved of investment, plagued by supply chain issues, and hobbled by red tape. That’s bad news for everyone, says Dominic Frisby.
-
Why investors should consider adding Glencore to their portfoliosTips Commodities giant Glencore is well placed to capitalise on rising commodity prices and supply chain disruption, says Rupert Hargreaves. Here’s why you should consider buying Glencore shares.
-
Avoid China’s stockmarket – here’s what to invest in insteadOpinion China’s stockmarket is not a good place for investors to be. But you can't just ignore the world's second-largest economy, says Dominic Frisby. Here, he picks an alternative China play.
-
Don’t write off Ukrainian iron ore miner Ferrexpo just yetAnalysis UK-listed Ukrainian iron-ore miner Ferrexpo has had its operations severely disrupted by Russia’s invasion. But, says Rupert Hargreaves, it’s brilliant business that’s worth keeping an eye on.
-
The big dividends on offer from mining stocksAnalysis Miners have gone from bust to boom and are now paying out some of the biggest dividends in the FTSE 100
-
Is this the end of the road for Russian gold miner Petropavlovsk?Analysis Shares in Russian gold miner Petropavlovsk have collapsed 90% this year as sanctions have gutted its business model. Rupert Hargreaves asks if the company has a future.
