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De Beers May Sight Estimated at $560M

May 12, 2014 11:23 AM   By Avi Krawitz
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RAPAPORT... The De Beers May sight closed with an estimated value of $560 million as the rough diamond market remains steady. Sightholders reported that prices on some boxes were adjusted slightly; however,  on average, prices and assortments were basically unchanged.

“The market is stable but at high rough price levels, whereby we don’t see profit margins as a manufacturer,” said one sightholder. “There are certain areas where De Beers prices are high, but we don’t have much of an argument for a reduction in prices. Goods are selling and polished demand is there.”

Dealers noted that rough trading on the secondary market has slowed with boxes selling at premiums of around 5 percent with credit terms. Sightholders explained that rough demand declined after De Beers raised prices at the previous March-April sight, signaling the end of a strong first quarter. Rapaport estimates that rough prices have increased by between 7 percent and 10 percent since the beginning of the year.

Mike Aggett, the CEO of H. Goldie & Company, a diamond broker for De Beers sightholders, reported that the mood at the sight was more subdued than recent months as the industry moves into a traditionally quieter period.

David Johnson, the head of midstream communications for De Beers, agreed that the rough and polished markets have entered a seasonally slower period,  but added that the outlook remains positive for the rest of the year.

Sightholders stressed that liquidity has tightened in the past month as rough prices rose, while their ability to sell a high volume of polished goods has been hampered by the backlog for certification at the Gemological Institute of America (GIA).   Aggett added that the situation regarding delays at the GIA has added to the financial pressure already being experienced by the manufacturers, “again bringing the question of margins to the fore.”

Another sightholder said, “I don’t see margins as a manufacturer. There are better margins to be made from buying polished rather than rough manufacturing – especially taking into account that extended cycle.”

The biggest backlog at GIA is for goods below 1-carat. According to the GIA website, polished diamonds below 1-carat submitted in the week of May 12 to the GIA lab in Carlsbad, California are expected to be released in the week of August 15, while it would take more than 4 months to certify goods at the GIA labs in Mumbai, Hong Kong, Johannesburg, Bangkok and Gaborone.

Still, sightholders reported that there is good demand for rough that manufactures into the range of 0.20-carat to 0.70-carat polished, while demand was weaker for cheaper rejection goods and smaller sizes. “It’s difficult to assess how the [GIA delays] are affecting the rough market,” explained one sightholder. “Liquidity is tight and there is a backlog but there is still competition to buy rough for the pointer size polished.”
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Tags: Avi Krawitz, De Beers, diamonds, Rapaport
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