De Beers sold an estimated $600 million worth of rough diamonds at its July sight after making slight increases to prices, on average. Sight participants noted that some refused goods but that there was demand from other companies to take up some rejected boxes.
“It wasn’t a very exciting sight,” said one Mumbai-based sightholder. “It seems that a lot of boxes were rejected but other companies picked up the goods as they were trying to create a position for themselves. I don’t think that De Beers was left with a lot of goods.”
Nigel Simson, the head of beneficiation at De Beers, confirmed that there were some refusals in specific areas where the market is weak, such as in the cheaper Indian goods. He explained, however, that this was part of the company’s dynamic distribution system, which gives sightholders the opportunity to refuse goods and allow others to demonstrate demand for those categories with a view to incorporate them into future intentions to offer (ITOs).
Still, sightholders noted a cautious mood in the rough market as polished trading has slowed in the past month. The RapNet Diamond Index (RAPI) for 1 carat certified polished diamonds fell 1.8 percent in the period July 1 to July 24 and downward adjustments were made to the Rapaport Price List this past week.
Sightholders expressed frustration about the contrasting trends in the polished and rough markets.
“It seems that De Beers expectations are that the market will bounce back in the next couple of months,” said one Antwerp-based sightholder. “Now, our expectation is that things will likely go down in the short term.”
Manufacturers added that other mining companies were also garnering strong prices at their tenders and contract sales.
However, most sightholders who spoke with Rapaport News noted tight profitability from manufacturing, while De Beers boxes are selling at very low premiums on the secondary market. “There is trading on the secondary market but with very long credit terms. So we’re selling credit not rough,” an India-based sightholder reported.
Liquidity in India has tightened and the recent devaluation of the rupee against the U.S. dollar has negatively impacted local manufacturing, domestic demand for polished and bank lending to the industry.
Indian dealers and manufacturers have therefore maintained low expectations for the August India International Jewellery Show (IIJS). “The show will be okay but not great. Retailers have had a tough three months,” one sightholder said. “But Diwali and the end-of-year holiday season should generate improved activity.”
Simson added that De Beers continues to expect overall growth in global consumer demand for diamonds in 2013.
De Beers is scheduled to report its interim results on Friday, July 26. Rapaport estimates that rough sales to sightholders fell 6 percent year on year to approximately $2.9 billion during the first six months of the year.