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De Beers Pricing Update

Jun 12, 2000 4:19 PM   By Martin Rapaport
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(Rapaport...June 12, 2000)De Beers has announced that they are increasing prices for their rough diamonds. The largest increase will be for inexpensive small diamonds. Initial reports indicate that prices for better larger quality diamonds have also increased. The 5-10 box is reportedly up about 5%-7% although the quality of the rough is said to be better. Better. The most important aspect about the announcement is that De Beers will not be making announcements every time they change rough prices and that De Beers may be changing prices much more frequently so as to reflect the competitive nature of the rough markets.

Reflecting its changing role in the world diamond market, De Beers will

start operating a flexible pricing policy that responds to market pressures.

The company wants to lose the "cartel" image by using its funds to benefit

shareholders and clients, hoping those clients will contribute to an

enhanced advertising campaign. In the past when demand for rough diamonds

lagged, De Beers had used a $5 billion diamond stockpile to sustain world

diamond prices. This worked well when De Beers handled nearly 80 percent of the world's rough diamonds. Today the stockpile rests at around $4 billion

and accounts for 40 percent, perhaps two-thirds of the world supply of rough

diamonds. On July 12, the company will propose this new relationship to its

125 clients at the next sight meeting. Gary Ralfe, managing director,

recently explained, "We feel it necessary to formalize and make transparent

the relationship between ourselves and our customers. We want to provide a

globally recognized identity to our Diamond Trading Company customers that

protects themselves, the producers, the retailers and consumers."

Full Text of De Beers Press Release:

As part of it's Strategic Review, De Beers has been examining its rough diamond pricing policy. In particular, if De Beers is to achieve its objective of increasing demand in a more competitive environment for the diamonds it markets, it will need to react with greater flexibility to changing market conditions. In response to the current strength in the rough diamond market, De Beers will be making adjustments to its prices at the next Sight commencing on June 5, 2000, particularly in the lower qualities/smaller sizes. With price adjustments likely to be made with greater frequency, De Beers will not in [the] future be making separate announcements on each occasion, but comment will be made regarding pricing strategy, as appropriate, when the company reports its annual and half yearly figures in March and August.
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