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De Beers Sales Drop in Slow Rough Market
Oct 3, 2019 7:31 AM
By Joshua Freedman
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RAPAPORT... De Beers’ sales slumped to $295 million in September as the miner
continued to allow sightholders to refuse goods in the prevailing weak
rough-diamond market.
The company maintained firm prices and offered increased
flexibility to encourage lower purchases, thereby reducing the oversupply in
the polished sector, sightholders explained to Rapaport News. It
continued its policy of allowing clients to reject 50% of their allocations. It also expanded its buyback program by enabling customers to sell back to De Beers
up to 30% of goods in the 2- to 10-carat rough categories, and 20% of the
smaller items that constitute the majority of its supply.
“[De Beers] wants the market to recover before bringing more
goods to the market,” an India-based sightholder noted. “They know if they try
to push more goods into the market it will take more time to recover.”
Proceeds from the eighth sales cycle of the year were higher
than the $287 million it recorded in August, but fell 39% below the $482
million the company garnered a year ago, De Beers reported Thursday. The
midstream is still struggling with a surplus of goods amid weak polished sales,
aggravated by social unrest in Hong Kong, which hampered a recovery in Far East
demand, an Antwerp-based sightholder explained.
“[De Beers] had this scenario in mind, which started in
July, that they would not change prices, and would restrict the volume that
goes to the market,” the sightholder observed. “People are picking out the
items which are relatively OK, but there’s no big appetite for the goods.” The
pipeline still contains too much polished, with sellers struggling to offload
inventory because competitors are significantly lowering prices, the
sightholder added.
The September sight is traditionally a smaller sale as
diamond manufacturing slows ahead of India’s Diwali festival, when factories
close for around three weeks. Indian manufacturers are demonstrating some
demand for rough so they can resume operations after the festival, which this
year begins on October 27.
“As we approach what is traditionally a quieter time of year for the diamond industry during the Diwali holiday, we have again offered our customers flexibility during this sales cycle,” De Beers CEO Bruce Cleaver said in a statement.
Meanwhile, sightholders have one eye on the upcoming
reassessment of their allocations for the 2020 sales session, known as an
intention-to-offer (ITO) period, which De Beers determines based on their
purchases during the current ITO, sources added. The company is shifting to a
calendar-year ITO period from January, replacing the previous April-to-March
system. As a result, the review of supply will take place before the end of 2019, rather
than during the first quarter.
De Beers’ rough sales have fallen 27% year on year to $3.21
billion in the first eight sights, according to Rapaport records. The next
sight will take place from November 4 to 8.
Image: Rough-diamond sorting at De Beers’ operations in Windhoek, Namibia. (Ben Perry/Armoury Films/De Beers)
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Tags:
Antwerp, Bruce Cleaver, De Beers, India, ito, Joshua Freedman, Rapaport News, rough, Rough Diamonds, sight, Sightholders, Sights
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