Anglo American plc CEO: De Beers Misjudged the Impact of Lab-Grown Diamonds, Expecting a Swift Recovery After the Shock

Anglo American plc CEO Duncan Wanblad admitted that De Beers and the entire natural diamond industry severely underestimated the impact of lab-grown diamonds, incorrectly predicting that the market would rebound quickly as it had in the past. This misjudgment is now manifesting in real costs: De Beers continues to post losses, forcing its parent company to write down its valuation three times and seek to sell this iconic diamond business.

According to a report by the Financial Times on August 4, Wanblad stated that, in hindsight, the industry's response to the competitive signals from lab-grown diamonds "should have been more proactive." He acknowledged that the diamond market has historically bounced back quickly from downturns, and "the general expectation was that this time would be no different," but reality proved this judgment wrong.

Data released by Anglo American plc last week showed that the average price of rough diamonds in the first half of the year fell 32% year-on-year to $105 per carat, even lower than the level seen in the first half of 2020 during the pandemic shock. De Beers recorded a cash loss of $113 million during the same period.

Meanwhile, Anglo American plc stated that the process of selling De Beers is "progressing," but no preferred bidder has yet been identified. According to reports, two informed sources revealed that a consortium led by former De Beers CEO Gareth Penny has long been considered the frontrunner, with discussions centering on a transaction value of approximately $1 billion.

Root of the Misjudgment: Mistaking Structural Shock for Cyclical Fluctuation

Wanblad's remarks reveal a fundamental cognitive bias among industry decision-makers.

He stated that the natural diamond market "indeed" underestimated the impact of lab-grown diamonds. Within the industry, some attributed the trend of consumers shifting to cheaper lab-grown diamonds to marketing failures, but this interpretation clearly failed to address the core issue.

The production cost of lab-grown diamonds is far lower than that of natural diamonds, and their retail prices are significantly cheaper, attracting an increasing number of consumers. Retailers have benefited from this—sales volumes have grown, and profit margins have expanded. This means that the channel end has not been harmed; what has been damaged is the pricing power and market share of natural diamonds.

Wanblad admitted that "hindsight is much easier than real-time judgment," but this statement does not obscure the fact that the industry misread this structural transformation as a self-correcting cyclical adjustment for a considerable period, thereby missing the window for earlier and more robust responses.

Supply Side Under Pressure: Wave of Mine Closures Has Arrived

The continued penetration of lab-grown diamonds is reshaping the supply landscape of natural diamonds.

The report stated that Wanblad revealed that about one-fifth of the current natural diamond supply will "exit the market" in the next 12 months or so, and that "not many" mines will resume production. This statement implies that the industry is undergoing a substantive supply contraction, rather than active regulation.

De Beers announced last month the suspension of production at its Venetia mine in South Africa, which is one of a recent series of mine closures or suspensions. Meanwhile, De Beers also shut down its self-operated lab-grown diamond business, Lightbox, this year—a move that is itself highly symbolic:

The company had attempted to segment the market and protect the natural diamond brand with a low-priced lab-grown diamond product line, but ultimately chose to exit.

The average price of rough diamonds in the first half of the year was $105 per carat, which not only dropped significantly year-on-year but also fell below the lows seen during the pandemic, intuitively reflecting the severe reality of simultaneous pressure on both supply and demand.

De Beers Continues to Bleed Cash, Anglo American plc Eager to Divest

De Beers' financial situation continues to deteriorate, becoming a significant drag on Anglo American plc.

In the first half of the year, De Beers recorded a cash loss of $113 million. Over the past three years, Anglo American plc has written down the value of De Beers three times. In contrast, boosted by rising copper prices, Anglo American plc's underlying earnings overall grew by one-third to $4 billion during the same period—making the drag effect of the diamond business even more pronounced.

Anglo American plc previously stated that the process of selling De Beers is progressing, but no preferred bidder has been selected. Wanblad refused to disclose a target selling price, stating only that there are currently "no exclusive arrangements with any party."

According to reports, two informed sources revealed that a consortium led by former De Beers CEO Gareth Penny has long been considered the frontrunner, with discussions held on a transaction amount of approximately $1 billion. Additionally, according to two informed sources, Nir Livnat, Executive Chairman of diamond company Diacore Group, and Michael O'Keeffe, Non-Executive Chairman of Burgundy Diamond Mines, are leading two other consortia participating in the bidding.