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London, United Kingdom—De Beers on Monday gave investors in parent company Anglo American PLC a rare glimpse into the secretive world of the diamond business. In a 90-minute presentation on Monday, Anglo hoped to give both investors and analysts more confidence in its position as a leading miner of not only diamonds but also of copper, coal, iron ore, and other minerals.

At least one analyst sees De Beers as the jewel of Anglo’s crown, valued at $20 billion. Indeed, diamonds, with a 75% gain in the past five years, have outperformed other extractive categories in Anglo’s portfolio, according to a report on Bloomberg.com. De Beers contributes about one fifth of Anglo’s revenue and one quarter of its earnings, but the investment community is demanding the diamond industry pull back the curtain on how the entire diamond pipeline works. Jeremy Wrathall, an analyst with Investec, told Bloomberg that shareholders’ interests are best served by transparency, disclosure, and openness.

“They can’t pull the shutters down and say ‘no,’” he told Bloomberg.

In the presentation, De Beers shared figures from its 2014 Diamond Insight Report. Along with its oft-repeated mantra about the growing supply-demand spread for diamonds (dwindling mine supplies vs. an emerging global middle class), De Beers also discussed the importance of diamond brands, especially its own Forevermark brand and the strong chord it struck in the market with its emphasis on responsible sourcing. Demand for branded diamonds has increased more than five-fold since 2002, according to De Beers’ figures: only 7% of consumers reported buying a branded diamond in 2002, compared with 36% in 2013. Just between 2011 and 2013 alone, demand for a branded diamond increased 14%, said the report. To that end, De Beers has invested $100 million to market the Forevermark brand. 

Critical to maintaining the future of the diamond industry is safeguarding the diamond dream, said Philippe Mellier, De Beers CEO, in the presentation. His remarks echoed the same themes presented to Forevermark U.S. retailers at a breakfast meeting in Las Vegas in June. 

But transparency remains one of the most critical underlying issues that the diamond industry must address, not only to satisfy Anglo American’s shareholders, but also to ensure adequate financing, period. Lack of transparency is one of the key reasons why more and more banks have exited the diamond industry. Different forms of finance have stepped in to fill the void—but time will tell if these are truly better business options than traditional banking or just a necessary evil for an industry that has no other choice. At the same time, Internet-savvy consumers also demand transparency in all their shopping transactions, creating a delicate balance between mystique and transparency all along the diamond supply chain, from producers to retailers.

Separately, Rapaport reports polished diamond prices continued to decline in October as suppliers sought to increase turnover and raise liquidity levels. Trading slowed during the Jewish holidays and subsequent Diwali festival period in India, while global demand remains weak. Buyers avoided making large-scale purchases in a downward trending market as they expected prices to soften further.  

The RapNet Diamond Index (RAPI) for 1-carat laboratory-graded diamonds declined by 2.2% in October. RAPI for 0.30-carat diamonds fell 3.7% and RAPI for 0.50-carat diamonds dropped 2.1% percent. Even large stones dropped: RAPI for 3-carat diamonds decreased by 1.5% last month.

According to the Rapaport Monthly Report “Weak Markets,” liquidity among manufacturers and dealers is being affected by weak polished demand, reduced bank credit (as per article above) and increased supply. Polished inventory levels rose during the Q3 lull in trading, and also because of improved turnover at the laboratories. Manufacturers also raised their factory output before the Diwali break. 

Rough trading slowed in October as manufacturers now have sufficient inventory for the fourth quarter holiday season. Rough prices softened on the secondary market and trading is expected to remain subdued for the rest of the year. De Beers’ prices remained basically stable, but weak rough demand should influence further softening of market prices in the coming months. Manufacturers are hoping that polished prices will firm during the holiday season to enable improved profit margins and liquidity levels. 

Diamond demand was cautious during China’s October 1 National Day Golden Week and India’s Diwali season, while U.S. demand is stable. Therefore, expectations for the holiday season are mixed as the focus of the trade has shifted from the Far East back to the United States. General U.S. retail sales were sluggish in October, although consumer confidence rose. Jewelry sales (total) are projected to rise by low single-digit margins over the 2013 holiday season. It is unclear whether modest holiday season sales growth will be enough to alleviate liquidity concerns among manufacturers and dealers going into 2015.

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