Viable diamond manufacturing still out of reach – Seber

Mathew Nyaungwa

De Beers’ Diamond Trading Company (DTC) sold an estimated $750 million worth of rough diamonds at its October sight recently, while maintaining prices relatively stable.

Reports say that several sightholders took allocations that were deferred from previous sights, making the October sight the largest De Beers sale so far in the year.

The year had proved to be a bad one for the industry and De Beers was forced to reduce prices by about an average 8 percent to 10 percent at the DTC August sight.
DTC sales declined by 17 percent year on year to $4.74 billion during the first 10 months of the year, analysts said.

Although there were relatively low levels of refusal of goods during the October sight, reports say some Sightholders were still not happy as it remained difficult to make money on DTC boxes.

Rough & Polished caught up with Hard Stone Processing managing director Burhan Seber who concurred that viable manufacturing is still out of reach.
He said the consequences were even dire on producer country sightholders who are not at liberty to do as they wish with their purchased rough.
Read excerpts below.

What is your evaluation of the latest sight?
” This was a slightly larger sight. Since prices of rough were adjusted at the July sight, as it was claimed by DTC, no significant changes were made … and therefore viable manufacturing is still out of reach unfortunately.
This has the most serious consequences to producer country sightholders who are ‘not free’ to do as they wish with their purchased rough, as they are scored on the basis of the rough they manufacture in the producing country they have the sight in.

Can you comment on the diamond prices realised during the latest sight compared with previous sights?
[There were] no real changes.
Why are we seeing improved diamond sales despite the prevailing uncertainty on the market?
There may be many factors. The two obvious are
– 1) very little has been manufactured for some period and so the stock in the pipeline may be thinning, giving reason to replenish;
– and 2) DTC clients may wish to retain a positive relationship with their supplier.

How does Philippe Mellier’s statement about ‘rough scarcity’ correlate with this enhanced diamond sight?
Though volume may have been surprising for the current environment, I do not believe it was a record sight. He may be referring to the long term. If demand was healthy, there could be scarcity in the future. This is not the case today. It is certainly a buyers’ market. Scarcity, if so, is currently artificial.
Producers are limiting stock with the hope of keeping prices high. While this could work in the short term, eventually it will boil down to whether manufacturing is profitable or not, and if not, further price reductions will have to take place in rough.
Producers are holding firm with prices, hoping for an improvement in the market; but all indications currently point to the opposite, as the current economic environment is only deteriorating.

So, with rough so scarce, does it mean that demand will continue to outpace supplies?
Opponents to the idea that rough will be scarce would point to claims of newly discovered potential deposits in Russia, current estimates in Zimbabwe, Canada’s continuing growth, and more stable governments in DRC and Angola allowing for greater investment in diamond mining, etc…, which may result in significant increases in diamond production in the long term, outpacing demand.”

Source Rough&Polished