De Beers december sight estimated at $490M

Avi Krawitz

De Beers Diamond Trading Company (DTC) December sight had an estimated value of ‎‎$490 million with sightholders still concerned about their ability to profit from ‎manufacturing. ‎


Sightholders are taking all the goods on offer but not with a happy face,” said one sight ‎participant. “There is still no profit, or very little profit in the goods, and De Beers is considered 10 percent more expensive than the rest of the market.”‎

Feedback from the sight indicated that De Beers kept prices basically stable with slight ‎declines on select items, such as colored and brown goods. One India-based sightholder ‎noted that the company changed assortment in its boxes, resulting in the goods being ‎effectively more expensive. “Prices are high in 90 percent of the boxes,” he said. “Only ‎some are gaining low premiums on the secondary market, while other boxes are selling ‎at a loss.”‎

Nigel Simson, head of ‎beneficiation at De Beers DTC division, explained that the ‎company feels that rough prices are currently aligned with the polished. “There has been ‎a slight pick-up in the polished and that was reflected on the sight floor,” he said. “But it ‎was a modest sight and I think everyone is looking forward to closing what was a difficult ‎year.” ‎

The small sight came after De Beers reported that it will be unable to fulfill sightholders’ ‎intentions to offer (ITO’s) that were submitted for the contract year beginning April 1, ‎‎2012, as the company reduced production during the period of weak demand. ‎Sightholders are currently working on submitting their applications for goods during the ‎next ITO.‎

De Beers said it will invite eligible customers of its Diamdel rough auctions to ‎apply for a sight during the remainder of the 2012 to 2015 contract period. De Beers will ‎send letters to eligible companies this week, after which the applicants will have to fill out ‎a contract proposal questionnaire. De Beers will notify sightholders of the new ITO’s in ‎late March. ‎

Lynette Gould, De Beers spokesperson, said the 2013 to 2014 ITO’s are expected to be ‎smaller than those published at the start of the 2012 ITO because of prevailing ‎sightholder demand levels. She added that production in 2012 has been less than ‎originally forecast at the start of the year.   ‎



De Beers production fell 20 percent year on year to 19.8 million carats during the first nine ‎months of 2012. The company has maintained its mining operations focused on ‎maintenance and waste ‎stripping during the period of market weakness that began in the ‎fourth quarter of 2011. While production at the high-value Jwaneng mine was delayed ‎due to heavy rainfall in Botswana in the past few weeks, Gould stressed it would not ‎further impact group production. ‎

Still, supply for the remainder of the current ITO period, during the first three months of ‎‎2013, is expected to be relatively small. ‎

Given the shortfalls in supply, sightholders expressed concern that De Beers might raise ‎prices in January or February. They note that polished margins have improved recently ‎and point to satisfactory U.S. demand during the holiday season. The RapNet Diamond ‎Index (RAPI™) for 1 carat certified polished diamonds rose 0.2 percent in the first half of ‎December, signaling the first possible monthly increase in more than a year. ‎

One Belgium-based diamantaire explained that sightholders have taken their losses in ‎‎2012, willing to balance the year with the profits they gained in 2011, which was a more ‎positive year for the industry. “But 2013 will have to be positive in its own right and if ‎they’re going to start tampering with prices again then they’re taking away the bit of ‎margin that there is on the goods now,” he explained. “There is a bit of a margin but it’s ‎very fragile because there’s still a lot of pressure on the goods.”‎

Simson stressed that De Beers has not made any decision regarding prices and added ‎that the company is constantly monitoring various factors that affect its pricing policy. ‎

Rapaport estimates that De Beers rough sales through DTC declined 12 percent to $5.2 ‎billion for the full year. ‎

Source Rapaport