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De Beers June Sight Estimated at $550M

Jun 17, 2015 4:52 AM   By Ronen Shnidman
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RAPAPORT... The De Beers June sight closed with an estimated value of $550 million. Diamond prices were reportedly stable at the sight, while sightholders noted a slight increase in the box price of larger goods. Some added that De Beers also improved the assortment quality on those same boxes.

Sightholder sentiment remained negative at the sight as manufacturers stated that polishing rough diamonds at current prices is still unprofitable. However, the amount of rejections at the sight was small.

“De Beers has made gestures to sightholders that it understands the situation in the market and the lack of profitability in the midstream, but it still has not done enough to address the situation,” said a sightholder with manufacturing operations in southern Africa.

The sightholder added that he expected polished demand for diamonds larger than 3 carats would remain soft until the end of 2015, with perhaps a small pickup during the Christmas shopping season.

De Beers boxes were trading on the secondary market at small premiums and on credit terms that averaged between 60 days and 90 days. While many boxes are still being traded below cost, the prevailing prices and credit terms constitute a small improvement in the market compared with recent months.

David Johnson, head of midstream communications for De Beers, said rough demand at the sight was in-line with expectations and although recently polished sales have been slow, this was normal for the season. He noted that while there are still some challenges, De Beers anticipates manufacturing activity and retail demand to pick up in the second half of the year.

“Overall, it appears that we are seeing stability return to the midstream,” said Johnson. “There have been some positive signs with more areas of polished goods seeming to no longer be in oversupply, helping to rebalance midstream dynamics.”

However, it is unclear to some market observers if the positive momentum will continue.

Manufacturers are operating at reduced capacity and are worried that De Beers will maintain prices at the next sight in July, which is expected to be a relatively large one, noted a Belgium-based rough buyer. If that happens, the level of rejections will increase significantly, he added.

“The market is having a tough time digesting the overhang in polished, which should be addressed by a reduction in the volume of rough supply as well as rough price adjustments,” said the buyer. “That is not to say that De Beers should suddenly cut rough prices by seven or 10 percent, but there should be a gradual correction in prices.”
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Tags: De Beers, Ronen Shnidman, rough market, rough prices, sight
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