Anglo American, owner of De Beers Group, said promising signs of demand recovery in the  second half of the year could bode well for the diamond business but warned against the potential  impact of pricing, supply and other issues.

 Sales have started to pick up, with the US and Chinese markets leading the growth, Anglo American CEO Mark Cutifani told investors on Friday.

 “We’re closely watching the US selling season. It’s a bit early to call how Thanksgiving and  the New Year selling season will go but so far, it’s quite encouraging despite Covid-19 issues in the  US. China has been very strong,” noted Cutifani. 

 De-stocking in the midstream and the downstream sectors will also benefit the diamond  sector. 

 Tightening supply across the industry however remains to be a significant concern, with  around 30 million carats dropping out of the market. According to Cutifani, at least two-thirds of this probably won't be coming back in the market given Argyle mine’s closure and other issues.

 “We're now moving into a market where we think there is potentially a supply deficit,” he  added.

 De Beers also cut its production outlook for the next two years to 33 million to 35 million  carats from 34 million to 36 million carats in 2021 to avoid oversupplying rough to the industry. In  2022, production guidance was reduced to 30 million to 33 million carats from 33 million to 35  million carats. De Beers expects to produce 30 million to 33 million carats in 2023.  

 It is aiming to end 2020 with around 26 million carats in output from 25 million to 27 million  carats originally. 

 “There’s an appropriate degree of prudence being exercised in what we’re forecasting going  forward and we certainly aren’t going to be a contributor to overstocking across the industry,” remarked Cutifani. “Given the supply situation, we won’t push more production out there unless we’re comfortable that prices are going to increase.”