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Diamond Buyers Club

De Beers made steep cuts in the prices of low-quality stones at its sale this week, according to people familiar with the situation.

The world’s biggest producer reduced prices as much as 10 percent for low-quality stones, said the people, who asked not to be identified because the sales are private. It’s the latest sign that the bottom end of the market is in turmoil. The business of low-end diamonds, which tend to be small and flawed, is struggling because of too much supply

De Beers sells rough diamonds to trade buyers who cut, polish and manufacture them into the polished stones sold in jewelry stores. While there is some correlation between rough and polished prices, lower prices at a De Beers sale is unlikely to make a difference at the consumer level.

Even so, U.S. retail jeweler shares moved on the news. Tiffany & Co. declined as much as 3.6 percent and Signet Jewelers Ltd. shares fell as much as 6.1 percent.

The business of low-end diamonds, which tend to be small and flawed, is struggling because of too much supply. Major cutting centers, such as Surat in India, have been squeezed by lower profit margins and the depreciation of the rupee.

There’s also concern that De Beers’s launch of man-made gems will add competition, especially at the bottom end of the market. But there’s no indication this has hurt demand so far.

De Beers is famous for its tight control over the diamond market. It sells gems at 10 sales a year in Botswana to a select group of customers. The buyers are expected to specify the number and type of diamonds they want, and then carry out the purchases at a price set by De Beers....

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