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Rough Prices Firm at $530M De Beers Sight
Jun 20, 2017 2:38 AM
By Joshua Freedman
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RAPAPORT... De Beers sold $530 million worth of rough diamonds in June as sightholders continued to complain of shrinking manufacturing margins
and a mismatch between rough and polished prices.
The miner lifted prices by an estimated 2% to 3% in certain
categories, sightholders told Rapaport News. Higher rough prices without
a corresponding increase in polished demand could lead to diminished profits
for the midstream, with some cutters already headed toward a loss on rough,
traders warned.
The value of the June sight, De Beers’ fifth of the year, was 7% below the $564 million the miner had sold a year earlier. The company’s rough sales fell an estimated 4% year on year to $2.92 billion in the first half of 2017, according to Rapaport records.
Traders attributed the decline to lower availability. As in the previous sight, De Beers did not offer any “ex-plan,” or extra goods, as the company has reduced the volume of rough it is making available this year.
Sightholders reasoned that De Beers was experiencing shortages in some categories of rough, while some suggested the miner was aligning rough supply with sluggish polished demand. De Beers has also noted it has increased supply to its Namibian government partners as per the recent agreement between the two parties.
“We’ve seen a very bullish rough market this year,” one
rough broker said, adding that dealers were “banging on my door looking for
rough.”
De Beers CEO Bruce Cleaver noted the strong demand in a
statement Tuesday, saying it came off the back of “positive feedback from the
Las Vegas trade show” and mirrored recent trends in the market.
The polished sector, however, “is only creeping up ever so
slightly,” the anonymous broker said. “I’ve never seen this sort of imbalance
before. I don’t believe this rough market can charge on like this forever.”
Other De Beers buyers were less pessimistic, but still noted
that business was increasingly difficult for the midstream.
“Rough is quite expensive compared to polished, so the
margins are low,” an India-based sightholder told Rapaport
News. Even so, he added, “De Beers is not pricing at unsustainable levels
such that sightholders are not making money.”
The rise in prices at the sight resulted in premiums
on the secondary market declining to about 4% from an estimated 5% to 10%
last month, according to sightholders. The gap between list prices — those De
Beers charged at the sale — and the rates secondary buyers are willing to pay
sightholders for diamonds has shrunk, they said. As a result, dealers have less
space to turn a profit on the goods.
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Tags:
Botswana, Bruce Cleaver, De Beers, gaborone, Joshua Freedman, mining, Rapaport News, Rough Diamonds, rough sales, Sightholders, Sights
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