De Beers cuts prices by an average of 8%

Avi Krawitz

August sight estimate at $580M
De Beers has reduced prices by an estimated average of 8 percent at its Diamond Trading Company (DTC) sight this week. The sight had an estimated value of about $580 million and ?no goods were left on the table.

Sightholders noted that the price adjustments were implemented across the board with larger declines of up to 17 percent for better-quality goods, while the drop was more conservative for pique commercial-quality stones.

It’s a step in the right direction,” one sightholder told Rapaport News. “There’s still room for more of a correction but De Beers said they don’t have any intention of making more adjustments.”

He explained that prior to this sight there was a 15 percent difference between the rough and polished price movements, and that the gap has now narrowed to about 5 percent. Another sightholder said that DTC is of the view that rough prices have now come in line with polished, which have since stabilized.

Louise Prior, the head of sightholder services and communications for DTC, said that DTC had a four point plan for this sight to include price adjustments to reflect a fair return on rough to polished in line with prevailing polished demand.

The sight seems to have been well received by all and shows our confidence in the market for the rest of year,” Prior said. “Sightholders have commented on the value in ?our boxes and the mood is much more upbeat this sight than previously.”

Other points DTC stressed were De Beers strategy to mine according to demand, its dynamic distribution system and the launch of a fourth quarter U.S. Forevermark campaign.

The sight followed the India International Jewellery Show (IIJS), which took place earlier this week. Reports from the show indicated that prices were steady for low color, SI and lower-clarity stones, while demand for better-quality stones remained weak among Indian buyers. Some noted a slight uptick in inquiries from Chinese diamond buyers in recent weeks and many are hoping that will translate into improved buying activity at the Hong Kong show in late September. One Indian sightholder based in Hong Kong noted, however, that Chinese buyers are expected to hold back from buying as long as the market is cautious.

Most sightholders who spoke with Rapaport News welcomed the DTC price adjustments and hope it will ease liquidity challenges and profit margins in the manufacturing sector. The move came after sightholders rejected more than 20 percent of their DTC allocations at the previous two sights. Sightholders took all the goods that were offered this week but some noted that DTC reduced its allocations as De Beers faces a slight shortfall in production this year.

The company has focused on waste mining and maintenance since the fourth quarter of 2012 and saw production fall 12 percent year on year to 13.4 million carats in the first half of 2012. One month’s worth of production was scrapped at its flagship Jwaneng mine in Botswana after closing operations due to a fatality at the end of June.

While the July and August DTC have traditionally been the largest sights of the year as sightholders buy goods to manufacture in time for various holidays, Rapaport ?estimates that this sight was 30 percent below that of one year ago. The July sight estimate was about 60 percent below 2011.

DTC sales have declined by approximately 23 percent year on year to about $4 billion through the seven sights that have taken place so far. the August sight was the first to present goods completely sorted in Botswana after DTC transferred its aggregation division to Gaborone earlier in the month. 

Source Rapaport