The De Beers May sight had an estimated value of $600 million as the company raised its rough diamond prices by approximately 4 percent. The price hike reflected a change in list prices on various goods as well as adjustments made to De Beers box assortments.
Dealers noted that trading on the secondary market was significantly reduced following the sight that ended on May 9 as De Beers goods are now selling at around list price, erasing the 5 percent premiums they had gained in the past few months.
One India-based sightholder noted that they were in fact losing money on the secondary market when accounting for the various broker fees and other costs associated with the goods. “Sightholders are losing money so they don’t want to sell,” he explained. “So they’re putting everything into manufacturing. We may not make so much money in manufacturing but at least we’re not losing.”
Factories in India have maintained cautious manufacturing levels, which are expected to remain well below capacity in the coming months, especially during the May summer vacation period.
Most sightholders who spoke with Rapaport News were frustrated by the sight and expressed surprise at the price hike as it followed an increase of approximately 3 percent implemented in April.
“As manufacturers, we’re again in that awkward position where we have to pay more for the rough and we have to fight for our prices on the polished,” said one Antwerp-based sightholder. “But we really don’t get a return on the goods and that’s very dissatisfying.”
Another sight participant added that the second quarter is generally a quiet period for the polished market as Indian dealers take their summer break and there’s no season to boost sales in the U.S. or the Far East. Given the three month manufacturing cycle, he reasoned that sightholders will need to defend these new rough prices come July, when he hopes the market will improve. “It’s not easy as there has been some price growth in the polished but not in all categories and definitely not to the same extent as the price of rough,” the sightholder stressed.
Rapaport estimates that rough prices have increased by approximately 10 percent so far in 2013. In contrast, the RapNet Diamond Index (RAPI) for 1-carat certified polished diamonds has increased by only 0.3 percent, while RAPI for 0.30-carat stones has risen 9 percent this year, driven by strong Chinese demand for these goods.
Feedback from De Beers May sight indicated that rough in sizes of 4 grainers to 8 grainers in all qualities, which yield 0.30 carat to 0.70 carat polished goods, registered price increases of about 7 percent, while cheaper Indian goods rose about 4 percent. De Beers reduced prices on some less popular goods.
During the first four sights of the year, De Beers sight sales have declined by 5 percent year on year to approximately $2.35 billion, according to Rapaport estimates. While the May sight was the first of the new contract year, sightholders expect smaller sights in the coming months given that their applications for goods for the year ahead was about 20 percent below those made last year.