De Beers Said to Cut Diamond Prices in Surprise Blow to Anglo

De Beers, the world’s largest diamond producer, surprised traders by cutting the price of gems at its latest sale, people familiar with the process said.

Prices had been expected to hold steady after De Beers promised to cut production last month. The auction’s results will be a blow to De Beers’s owner Anglo American Plc as the London-based mining group relies on its diamond business to counter routs in the iron-ore and coal markets. Diamonds accounted for about a quarter of the company’s sales last year.

De Beers lowered prices by about 3 percent, with bigger reductions for certain categories, at a sale this week in Botswana, according to the people, who asked not to be identified as the information isn’t public. The miner offered about $450 million of rough diamonds at the sale, the people said.

The weaker-than-expected sale also shows the industry remains stretched by a shortage of credit after last year’s decision by KBC Groep NV to wind down its Antwerp Diamond Bank. It had been a source of finance for 80 years to the network of companies that trade and process the stones in the Belgian port city.

De Beers had sought to support rough diamond prices by cutting supply. The company said last month that “in light of current trading conditions” it would produce 30 million to 32 million carats this year compared with an earlier target of as much as 34 million carats.

Rough diamond prices fell 1.2 percent in the first quarter, according to data from U.K.-based WWW International Diamond Consultants, after a 6.9 percent drop in the last three months of 2014, the biggest quarterly decline in more than two years.

De Beers said in February that there was “scope for some price increases” this year. De Beers then failed to sell 30 percent of the diamonds it offered at its March sale, known as a sight, according to trade publication Rapaport.

De Beers sells diamonds at prices it sets at invitation-only sights held 10 times a year at its offices in Botswana. It’s handpicked customers, known as sightholders risk losing the privilege of taking part in future sales if they walk away.

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