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Profit Margins Improve at $425M De Beers Sale

Dec 18, 2019 9:15 AM   By Joshua Freedman
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RAPAPORT... De Beers’ rough sales totaled $425 million in December, the highest since April, as lower price levels and better profit margins spurred an upturn in demand from sightholders.

Buyers are returning to the market after six months of sluggish activity, market sources said. While sales were 22% lower than a year ago, they improved compared with November’s total of $400 million, De Beers reported Wednesday.

“Following continued polished-diamond price stability in the lead-up to the final sales cycle of the year, we saw further signs of steady demand for rough diamonds during sight 10,” said De Beers CEO Bruce Cleaver.

De Beers maintained its prices at last week’s sight in Botswana after reducing them by around 5% in November. The lower cost of rough has made manufacturing more profitable and increased the premiums dealers can get when they resell the miner’s goods on the secondary market, a broker noted.

“The prices are now more convenient, and while it’s still difficult to make a decent profit, sightholders can either sell the rough at cost or a 1% premium, and manufacturers can make a few percent,” the broker explained on condition of anonymity. Sightholders are more positive about the market than they were, and are now looking for rough since inventory levels have decreased, the broker continued.

The rough market has struggled this year amid an oversupply of goods in the midstream, with De Beers’ sales falling 25% to $4.04 billion for the full year, according to Rapaport calculations based on the miner’s reports. The company introduced extra concessions for much of the second half, allowing sightholders to reject more goods than usual, but withdrew that flexibility for the December sight as sentiment had improved, rough-market sources told Rapaport News.

The company’s average selling price fell around 20% for the first nine sights, reflecting a 5% drop in its rough-price index and a shift to lower-value goods, Mark Cutifani, CEO of parent company Anglo American, said last week.

Image: De Beers’ Orapa mine in Botswana. (Ben Perry/Armoury Films/De Beers)
Tags: Anglo American, Bruce Cleaver, De Beers, Joshua Freedman, Manufacturing, Mark Cutifani, profit margins, Rapaport News, Sightholders, Sights
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