RAPAPORT... De Beers raised prices slightly at the Diamond Trading Company (DTC) sight this week as the mining company has curbed its rough supply in the first quarter of 2012. The March sight had an estimated value of $520 million with prices up an average 2 percent to 3 percent.
Sight participants noted that rough demand has improved, particularly from Indian cutters, but they added that DTC boxes are considered expensive at the moment. “Demand is better as India is waking up but they are still not very aggressive in their buying and there are many boxes for sale with no buyers,” said one sight participant. “DTC boxes are considered expensive, especially when sellers don’t want to sell at a loss.”
Rough premiums on the dealer market increased in the past two weeks as market sentiment improved following the Basel and Hong Kong shows. DTC boxes and ALROSA goods have been selling at an average 5 percent premium. Sightholders observed that the price increases mainly affected the Indian goods.
Louise Prior, the head of sightholder services and communications for DTC, noted that the mood at the sight was positive and that confidence among sightholders had improved compared with the past few sights. She reported that the March sight was relatively small in carat terms and said the price adjustments were marginally upward. “We’ve had some really good box presentations at this sight so while on paper some boxes might appear to have a price hike, the adjustments were nominal,” she explained.
One sightholder noted that De Beers has chosen to curtail supply rather than reduce prices.
De Beers stated in its annual report in February that it curbed production during the fourth quarter, taking advantage of cautious trading activity to carry out maintenance at some of its mines.
Jim Gowans, the chief executive of Debswana, recently told Rapaport News that this strategy has continued into the first-quarter and that the Botswana operations will likely ramp up production in the second-half of the year. He explained that the company has maintained a cautious level of production as the market remains “sensitive” and an oversupply would have a detrimental impact on the market.
DTC sales likely fell 13 percent year on year to $1.77 billion during the first quarter, according to Rapaport estimates.
The March sight was the final one of the contract period. DTC announced in December that as from the April 2012 sight, 66 sightholders will receive supply in London, slightly below the 68 who currently have sights there. The number of Botswana sightholders has been increased to 21, from 16 currently, while 13 companies will receive sights in Namibia, compared with the previous list of 10. DTC’s South African client base was reduced to 10 from 13, while the company maintained its two sightholders in Canada.
DTC is preparing to move its London sights to Gaborone, Botswana by the end of 2013.