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Who’s Buying the Rough?
Editorial
May 8, 2015 5:00 AM
By Avi Krawitz
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RAPAPORT... Much has been said about unsustainable rough diamond prices in the past year. The lack of profitability in the diamond manufacturing sector has caused manufacturers to significantly scale down their operations and rough purchases in the past six months.
Indeed, in an article published this week, Martin Rapaport, chairman of the Rapaport Group, urged the trade to prioritize the purchase of polished diamonds over rough. Rapaport called on the banks to stop financing unprofitable diamond manufacturing until polished prices rebound and profitability returns.
Still, manufacturing remains at the core of the diamond industry, employing tens of thousands of workers and providing sustenance to possibly millions of their dependents. In the long run, manufacturers require profitable rough supply to ensure continuity in their operations.
Many of the larger manufacturers argue that securing consistent long-term supply is the key to gaining that continuity. The guarantee of consistent rough supply enables manufacturers to plan their production and assure polished supply to their jewelry wholesale and retail clients who often run programs with specific needs.
Consequently, a significant proportion of rough diamond production is sold to the market via long-term contracts.
Not all diamond mining companies are able to sell their production in such a manner. Most junior and mid-size miners sell via spot auctions or tenders, whereby buyers compete for rough in a bidding process. Some also have off-take agreements with buyers who are offered first selection of the mining company’s supply at a pre-negotiated price.
Only a handful of the larger mining companies have the scale of production that enables them to guarantee a scheduled, consistent supply of rough to a set group of clients. Therefore, it’s worth noting who the major buyers of rough are in the market, who is selling to them and how.
De Beers, ALROSA, Rio Tinto and Dominion Diamond Corp., which together account for about two-thirds of global production by volume, each recently penned new long-term supply contracts with their respective clients.
De Beers selected 85 clients known as ‘sightholders’ to receive rough during the new three-year contract period that began on April 1. The company sells approximately 90 percent of its supply to sightholders on a schedule of 10 sights per year, and the remainder are mainly sold via auction sales.
Of the total number of sightholders, 81 were selected as part of De Beers Global Sightholder Sales (GSS) – four of which are for industrial diamond supply. Twenty companies receive beneficiation supply in Botswana, eight in South Africa and 11 in Namibia. A spokesperson for De Beers explained that the 11 sightholders in Namibia remained unchanged this year while the company is still negotiating a new sales agreement with the government.
Four companies were awarded accredited buyer status for GSS and there is one accredited buyer for De Beers South Africa supply. An accredited buyer is a new category of De Beers client, giving those selected companies the opportunity to purchase rough from De Beers on an ad-hoc basis, depending on the availability of ex-plan, which is supply that is in excess of sightholders’ annual applications. Three of the accredited buyers have a sight in other beneficiation areas, while two solely have accredited buyer status.
De Beers was scheduled to update its website with the full list of sightholders and accredited buyers this week, coinciding with the first sight of the new contract period. The list revealed that 33 sightholders are based in India; 18 in Belgium; 12 in Israel; nine in the U.S.; four in Hong Kong; two each in the United Arab Emirates (UAE) and Switzerland; and one in Canada, Japan, Mauritius, Russia and the U.K. respectively; according to Rapaport News records.
There’s a similar spread between the major manufacturing and rough trading centers among the so-called ‘ALROSA Alliance’ customers. ALROSA sells about 70 percent of its production through its long-term contracts and the remainder via spot and special auction sales. Among the 47 ALROSA alliance clients listed on the company’s website, 15 are based in Belgium, 14 in India, eight are in Russia, four in Israel and three in Hong Kong. There is also one each from Belarus, Japan and the U.S.
Some 23 companies have supply contracts with both ALROSA and De Beers, according to Rapaport News records. Three of those also have contracts as part of Rio Tinto’s ‘Select Diamantaire,’ program, while five others are also ‘Dominion Preferred Purchases.’ Three companies have long-term supply contracts with De Beers, ALROSA, Rio Tinto as well as Dominion.
Rio Tinto has listed 17 select diamantaires on its website that have access to approximately 70 percent of Rio Tinto’s rough supply. The remainder is sold through tenders and special invitation sales for rough larger than 10.8 carats. Dominion sells all of its rough to the 33 preferred purchasers listed on its website.
In total, 127 individual companies have secured long-term supply contracts from at least one of the four suppliers – including the two which are solely De Beers accredited buyers. The comprehensive list includes companies which are purely polished manufacturers or rough dealers, and some that have downstream activities that extend into jewelry manufacturing, wholesale and retail.
In fact, an increasing number of the major jewelry retailers are appearing on such lists, having raised their rough procurement and diamond manufacturing operations in recent years. Signet Jewelers, Tiffany & Co. (Laurelton), Chow Tai Fook, Chow Sang Sang, Luk Fook and Gitanjali each gained at least one De Beers sight this year.
This column has argued before that these jewelry companies can better afford higher rough prices than their pure-play manufacturing counterparts. They garner higher margins from the jewelry they sell than manufacturers do for their polished.
However, the market is as strong as its weakest link. And manufacturers have signaled in the past few months that they’re not prepared to take continuous losses from their rough supply.
In particular, they’re referring to the high prices of contracted supply. Whereas the bids at auction and tender sales reflect the price that buyers are willing to pay for the goods, contracted supply tends to sell at a premium for the promise of consistency.
Consequently, the ability of these 127 companies to buy rough and sell their polished sets a benchmark for determining the sustainability of the diamond industry.
Having penned long-term rough supply agreements with the major mining companies in 2015, these companies must surely believe that the guarantee of rough supply should bring with it reasonable profits for the core of the diamond industry. Perhaps in the long term it will.
Here’s a list of companies which have supply contracts with De Beers – including Global Sightholder Sales (GSS) and beneficiation supply in Botswana, Namibia (NDTC) and South Africa – ALROSA, Rio Tinto, and Dominion Diamond Corp., as collected by Rapaport News: (A pdf version of the list can be found in the Rapaport Weekly Report).
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Company Name |
Head Office |
De Beers |
ALROSA |
Rio Tinto |
Dominion |
|
1 |
A.C. Diam |
Belgium |
ALROSA |
2 |
A. Dalumi Diamonds |
Israel |
GSS, Botswana |
3 |
Almod Diamonds |
USA |
GSS, NDTC |
4 |
AMC |
Belgium |
GSS, S. Africa |
5 |
Ankit Gems |
India |
GSS, NDTC |
6 |
Arjav Diamonds |
Belgium |
GSS, Botswana |
7 |
Arslanian Fréres |
Belgium |
ALROSA |
8 |
Asian Star |
India |
GSS |
ALROSA |
Dominion |
9 |
Aspeco (K Girdharlal) |
Belgium |
ALROSA |
10 |
Bhavani Gems |
India |
GSS |
11 |
Blue Star Diamonds |
India |
GSS, Botswana |
Dominion |
12 |
Brilliant Gems |
Belgium |
ALROSA |
13 |
Brilliant Trading Company (1974) |
Hong Kong |
ALROSA |
14 |
Bronner Trading Company |
Belgium |
ALROSA |
15 |
Choron Diamonds |
Belgium |
Accredited Buyer (GSS) |
16 |
Chow Sang Sang Jewellery Company |
Hong Kong |
GSS |
Dominion |
17 |
Chow Tai Fook Jewellery Co. |
Hong Kong |
GSS, Botswana, S. Africa |
ALROSA |
Rio Tinto |
18 |
Classic Diam |
Belgium |
Dominion |
19 |
Comdragmetall of RS(Y) |
Russia |
ALROSA |
20 |
Corona Jewellery Company |
Canada |
Dominion |
21 |
Crossworks Manufacturing |
Canada |
GSS, NDTC |
Rio Tinto |
22 |
D Navinchandra Gems |
Belgium |
GSS |
Dominion |
23 |
Dali Diamond Co. |
Belgium |
GSS |
ALROSA |
24 |
DDK |
Russia |
ALROSA |
25 |
De Toledo Diamonds |
Israel |
GSS |
26 |
Dharmanandan Diamonds |
India |
GSS |
27 |
Diacore International |
Switzerland |
GSS, Botswana, NDTC, S. Africa |
28 |
Diajewel |
Belgium |
ALROSA |
Dominion |
29 |
Diambel |
Belgium |
GSS |
Rio Tinto |
30 |
Diamond India |
India |
ALROSA |
31 |
Diamtrade |
Belgium |
Dominion |
32 |
Dianco |
Belgium |
GSS |
Rio Tinto |
33 |
Diarough |
Belgium |
GSS |
Rio Tinto |
34 |
Diarush DMCC |
UAE |
GSS |
35 |
Dilipkumar V. Lakhi |
India |
GSS |
ALROSA |
Dominion |
36 |
Dimexon International Holding |
India |
GSS |
ALROSA |
Rio Tinto |
37 |
E. Schreiber |
USA |
Rio Tinto |
38 |
Eloquence Corporation |
USA |
Industrial |
39 |
EPL Diamond |
Russia |
ALROSA |
40 |
ESPEKA |
Belgium |
ALROSA |
41 |
Eurostar Diamonds International |
Belgium |
GSS, Botswana |
42 |
Exelco |
Belgium |
GSS, Botswana |
43 |
EZ Diamonds |
Israel |
GSS |
44 |
Fruchter Gad Diamonds |
Israel |
GSS |
45 |
G.G. Export |
India |
Dominion |
46 |
Gemmata |
Belgium |
Rio Tinto |
47 |
Gitanjali |
India |
GSS |
48 |
Gold Star Diamond |
India |
GSS |
49 |
Gomelskoe PO Kristall |
Belarus |
ALROSA |
50 |
H. Dipak & Co. |
India |
GSS |
51 |
Hardstone Processing |
Namibia |
NDTC |
52 |
Hari Krishna Exports |
India |
GSS |
ALROSA |
Rio Tinto |
Dominion |
53 |
Hasenfeld-Stein |
USA |
GSS |
54 |
Henri Polak Diamond Corp. |
USA |
Industrial |
55 |
HVK International |
India |
GSS |
Dominion |
56 |
I.D.R.P. |
Belgium |
ALROSA |
Dominion |
57 |
IDH Diamonds |
Belgium |
Rio Tinto |
58 |
IGC Group |
Belgium |
GSS, Botswana |
59 |
Interjewel |
India |
Rio Tinto |
Dominion |
60 |
Jasani |
India |
GSS |
ALROSA |
61 |
Jewelex India |
India |
GSS |
62 |
Julius Klein Diamonds |
USA |
GSS, Botswana, NDTC, S. Africa |
63 |
K Girdharlal International |
India |
GSS |
64 |
K P Sanghvi & Sons |
India |
GSS |
ALROSA |
Rio Tinto |
65 |
Kapu Gems |
India |
Dominion |
66 |
Karp Impex |
India |
GSS |
ALROSA |
67 |
KGK Diamonds (I) |
India |
GSS, Botswana, S. Africa |
ALROSA |
68 |
Kiran Gems |
India |
GSS |
ALROSA |
Dominion |
69 |
Komal Gems (Laxmi) |
Belgium |
Dominion |
70 |
Kristall Production Corporation |
Russia |
GSS |
ALROSA |
71 |
Kristall-99 |
Russia |
ALROSA |
72 |
L&N Diamonds |
Israel |
ALROSA |
Rio Tinto |
73 |
L.L.D. Diamonds |
Israel |
ALROSA |
74 |
Laurelton Diamonds |
Belgium |
GSS, Botswana, NDTC |
ALROSA |
Rio Tinto |
Dominion |
75 |
Laxmi Diamond |
India |
GSS |
76 |
Lazare Kaplan International |
USA |
Accredited Buyer (GSS), NDTC |
77 |
Lazyrit-D |
Russia |
ALROSA |
78 |
Leo Schachter & Company |
Israel |
GSS, Botswana |
79 |
Lieber & Solow |
USA |
Industrial |
80 |
Luk Fook |
Hong Kong |
GSS |
81 |
M Suresh Company |
India |
GSS |
Dominion |
82 |
Mahendra Brothers Exports |
India |
GSS |
Dominion |
83 |
Mohit Diamonds |
India |
GSS |
84 |
MOTIGANZ Diamond Group |
Israel |
Accredited Buyer (GSS), Botswana |
85 |
Niru Diamonds Israel (1987) |
Israel |
GSS |
86 |
Penford (Diamcore) |
Israel |
ALROSA |
87 |
Pluczenik Diamond Company |
Belgium |
GSS, Botswana, NDTC |
ALROSA |
88 |
Pratham International DMCC |
India |
Dominion |
89 |
Premier Diamond Alliance |
USA |
GSS |
90 |
Richold |
Switzerland |
GSS |
91 |
Rosy Blue (India) |
India |
GSS |
ALROSA |
92 |
Rosy Blue |
Belgium |
GSS |
Dominion |
93 |
Ruis Diamonds |
Russia |
ALROSA |
94 |
S. Vinodkumar Diamonds |
India |
GSS |
95 |
S.D. Diamond |
USA |
ALROSA |
96 |
S.V. Gems |
Belgium |
ALROSA |
97 |
Safdico International |
Mauritius |
GSS, Botswana, S. Africa |
98 |
Sahar Atid Diamonds |
Israel |
GSS |
ALROSA |
Dominion |
99 |
Sakha Diamond |
Japan |
ALROSA |
100 |
Sauraj Diamonds |
Belgium |
Dominion |
101 |
SBMH |
Israel |
Accredited Buyer (GSS) |
102 |
Schachter and Namdar |
Hong Kong |
NDTC, Accredited Buyer (S. Africa) |
103 |
Shairu Gems Diamonds |
India |
GSS |
104 |
Sheetal Manufacturing Company |
India |
GSS |
ALROSA |
Rio Tinto |
Dominion |
105 |
Shree Ramkrishna Export |
India |
GSS |
ALROSA |
Dominion |
106 |
Shrenuj & Company |
India |
GSS, Botswana, S. Africa |
107 |
Signet Jewelers |
USA |
GSS, Botswana |
Rio Tinto |
108 |
Simoni Gems |
Belgium |
Dominion |
109 |
Singh Diamonds |
India |
Dominion |
110 |
Soradiam |
Belgium |
Dominion |
111 |
Star Diamond Group (SDG) |
Belgium |
GSS |
ALROSA |
112 |
Star Rays |
India |
GSS |
Dominion |
113 |
Suashish Diamonds |
India |
GSS |
114 |
Taché Company |
Belgium |
GSS, Botswana, S. Africa |
ALROSA |
115 |
Tasaki & Co. |
Japan |
GSS |
116 |
Trau Bros |
Belgium |
GSS, Botswana, NDTC |
ALROSA |
117 |
Tunalgy |
Russia |
ALROSA |
118 |
V D Global |
India |
GSS |
119 |
Van Moppes (Tache) |
UK |
Industrial |
120 |
Venus Jewel |
India |
GSS |
ALROSA |
Rio Tinto |
Dominion |
121 |
Vijay Diamond (FZE) |
UAE |
GSS |
122 |
Vishindas Holaram (Lakhi) |
USA |
Dominion |
123 |
Wing Hang Diamond Co. |
Hong Kong |
GSS |
ALROSA |
124 |
Yaelstar |
Belgium |
GSS |
Dominion |
125 |
YDI - Yoshfe Diamonds International |
Israel |
GSS |
126 |
Yerushalmi Brothers Diamonds |
Israel |
GSS, Botswana |
127 |
Yosi Glick Diamonds (2003) |
Israel |
GSS |
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The writer can be contacted at avi@diamonds.net.
Follow Avi on Twitter: @AviKrawitz and on LinkedIn.
This article is an excerpt from a market report that is sent to Rapaport members on a weekly basis. To subscribe, go to www.diamonds.net/weeklyreport/ or contact your local Rapaport office.
Copyright © 2015 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400.
Disclaimer: This Editorial is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights. |
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Tags:
Alrosa, Avi Krawitz, Chow Tai Fook, De Beers, diamonds, Dominion, Jewelry, Rapaport, Rio Tinto, Signet, Tiffany
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