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De Beers Jan. Sight Estimated at $700M
Rough Prices, Premiums Rise
Jan 28, 2014 5:43 AM
By Avi Krawitz
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RAPAPORT... The De Beers January sight closed with an estimated value of $700 million as the company raised prices by 5 percent on average. The price hike affected most categories, while the company also adjusted assortments in its boxes.
Rough demand from the secondary market improved with solid premiums emerging on De Beers boxes. While there were requests for additional stones during the sight, De Beers did not have the goods to fulfill additional demand and there was little ex-plan provided. Despite the strong demand, sightholders noted the price increase was slightly higher and further reaching than they expected.
“The De Beers price increases go well over the categories that have changed,” said an Antwerp-based sightholder. “There are certain categories for which you could justify those prices have increased since November and December, and that would be more in the smaller pointer size goods. But what De Beers did across the board, hitting mostly the melee goods and the smalls, was unseen.”
The prices on small Z and small makeable boxes rose by more than 6 percent, while prices of the fine 2.5/4-carat box rose by about 4 percent.
A Mumbai-based sightholder confided that traders weren’t too upset by the price hikes as the rough diamond market has become buoyant in January with steady premiums on the secondary market.
Guy Harari, the CEO of Bluedax, an Israel-based rough brokerage, reported that demand for De Beers goods rose in pre-sight trading as people anticipated the price increase since ALROSA raised its prices at its sale one week earlier. “Buyers were ready to pay high premiums on boxes before the sight without knowing the list price,” Harari explained. “When they saw the extent of the increases, the trade cooled down a bit. They were surprised because polished demand is not exceptional. ”
Sightholders who spoke with Rapaport News were at odds in explaining why the rough market has suddenly become so buoyant after a period of slow demand in the second half of 2013.
“I’m not sure what has changed except that we’ve concluded one year and started a new one,” said an Antwerp-based sightholder. “The Indians came back on a different note and as we know they’re driving the market.”
David Johnson, head of midstream communications for De Beers, explained the market improvement was influenced by a combination of factors. He noted there has been good U.S. demand at the end of the year, a fairly long gap between rough buying cycles in December and January which has led to a depletion of rough inventory, and easing liquidity pressures as some receivables have come through from the fourth quarter. Johnson added that there have also been positive trends in the polished market with prices increasing and some slower categories starting to move again.
A Mumbai-based sightholder agreed that retailers in the U.S. and the Far East have shifted inventory. He also reported that Indian factories restarted operations in December after an extended Diwali break and needed rough to boost inventory. He added that the positive mood has been encouraged by the relative stability of the rupee in December. The rupee has depreciated a bit in January and stood at INR 62.7 = $1 at press time.
However, sightholders expressed doubt whether the current level of activity will be sustained. “There’s been a pattern in the past few years whereby we have a strong rough market in the first three to four months of the year, which leads to disappointment that the polished market doesn’t pick up as much, and then we struggle to catch up for the rest of the year,” said an Antwerp-based sightholder. “The market has improved but I don’t see where we can push polished prices to the same extent that the rough has increased.''
Similarly, an Indian sightholder expects the market to slow again in the second quarter because manufacturing profit margins remain tight and as dealers and sightholders are currently over extending themselves in the rough market.
Mike Aggett, the managing director at H. Goldie, a De Beers broker, cautioned in his sight report against over exuberance in the rough market. “It will be crucial over the coming months that there is alignment among all elements of the pipeline working toward stable growth and avoiding the speculative behavior that inevitably causes longer term disruption,” Aggett wrote. “Already we are seeing market premiums increasing still further despite the price adjustment and this is not a healthy sign for long-term stability.”
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Tags:
Avi Krawitz, De Beers, diamonds, Rapaport
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