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De Beers Reduces Prices at November Sight
Nov 6, 2019 4:57 AM
By Joshua Freedman
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RAPAPORT... Sightholders welcomed De Beers’ decision to lower prices
at this week’s rough-diamond sale, but noted that further discounts were
necessary to improve profits in the manufacturing sector.
The company reduced prices of higher-end goods by 5% to
7% at this week’s November sight, and offered deeper cuts in cheaper categories,
sources reported. The move was a response to uncertain polished demand and slim
midstream margins, which has impacted manufacturers’ appetite for rough.
“It’s not nearly enough, but it’s in the right
direction,” a sightholder specializing in larger goods told Rapaport News.
In those items weighing 2 carats and more, De Beers let
clients sell 20% of goods back to De Beers, enabling them to keep the
better-value rough and avoid taking on unwanted inventory, the sightholder reported. That allowance —
known as buybacks — was down from the 30% it offered for the larger stones at
the previous sight in September, the source explained.
Under the buyback policy, clients may sell back up to a
fifth of the goods they purchase without it affecting their “demonstrated
demand” —
sightholders’ track record of rough-buying that De Beers uses to determine
future allocations. The company previously allowed 10% buybacks, but increased
that in the second half of this year to ease the pressure on the market.
De Beers has kept prices stable this year, instead responding
to the slowdown by restricting supply by allowing clients to defer, reject or
sell back more diamonds than usual. It slashed prices in November 2018 and June
2019, but those reductions were on lower-quality items. Sightholders continued
to experience thin profit margins, with many dealers making a loss when
reselling goods on the secondary market.
“Even if sales are good, the margins are difficult,” an
India-based sightholder explained. “Something has to be done, otherwise things
will just continue as they were. So this is good, as they had held on for a
long time [without lowering prices].”
An oversupply in the midstream has negatively affected
polished prices this year, with the RapNet Diamond Index (RAPI™) for 1-carat
diamonds sliding 4.7% between January 1 and November 1. As a result, the market
for smaller and larger, higher-quality rough is under pressure, miner Gem
Diamonds said Tuesday while reporting a 55% drop in third-quarter sales to
$36.3 million.
De Beers declined to comment on pricing. It is scheduled
to release the sales total for the sight next week.
Image: Rough-diamond sorting at the offices of Debmarine Namibia, Namdeb and Namibia Diamond Trading Company in Windhoek, Namibia. (Ben Perry/Armoury Films/De Beers)
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Tags:
Botswana, De Beers, Joshua Freedman, mining, Rapaport News, rough, Rough Diamonds, rough sales, Sightholders, Sights
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