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De Beers Sight Estimated at $700M

Prices Rise, Premiums Drop and Liquidity Tightens

Apr 8, 2014 7:24 AM   By Avi Krawitz
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RAPAPORT... De Beers sight number 3 closed with an estimated value of $700 million after the mining company raised its rough diamond prices by 3 percent to 4 percent. Box assortments were relatively unchanged and some ex-plan was offered. Trading on the secondary market subsequently slowed and premiums declined.

“The market for second hand boxes is dead,” said a sight participant. “The price increase was expected, but many boxes are now very expensive.”

David Johnson, head of midstream communications for De Beers, acknowledged that prices were adjusted by low single-digit percentages. He reported that there was good demand for rough and that sentiment was still positive among sightholders. 

“We always look at prevailing conditions in the industry and base our pricing on that performance,” Johnson said. “We saw a fairly strong first quarter and March was good with positive reports from the Hong Kong and Basel shows.”

ALROSA also adjusted prices during its March trading session, raising prices for some categories and decreasing for others, a spokesperson for ALROSA reported. On average, prices stayed at almost the same level as in February, the spokesperson added. ALROSA contract clients that spoke with Rapaport News said the company kept prices basically stable at the April trading session that had just begun at press time.
Rapaport estimates that rough prices have increased by approximately 7 percent to 10 percent since the beginning of 2014.

Following the De Beers sight, Guy Harari, the CEO of Bluedax, an online rough diamond broker, noted that the market has slowed for better-quality, clean diamonds, while high premiums remain only on low-end goods. An India-based sightholder added that people don’t want to buy better-quality diamonds that are certifiable because of the long turnaround time at the Gemological Institute of America (GIA).

“There a lot of goods in the pipeline and there’s no liquidity because if I want to buy goods today I need cash, but I’m not able to turn polished sales because goods aren’t coming back from the GIA,” he explained. “So, manufacturers are buying fewer better-quality goods than during the past few months. Demand has dropped and prices have increased so trading has declined.”

Sightholders said they weren’t surprised by the increases since De Beers maintained prices at its previous February sight and premiums on boxes steady on the secondary market during March. They also noted continued strong demand for dossiers, but argued that trends in other goods didn’t warrant a rough price increase that affected most boxes and categories at the more recent April sight.

“People expected prices to rise because the premiums were there, not because there was value in those goods,” said one sightholder. “There’s a money crisis right now and I don’t think things will improve in the short term because of what’s happening at the GIA and given that the miners have increased their production. We’re also entering a lighter period of the year for polished demand.”

The recent De Beers sight was the final sight of the 2013 and 2014 intention to offer (ITO) period. Johnson said applications for the coming ITO period were about in line with last year's. De Beers rough sales have increased by approximately 7 percent to $2.05 billion in the first quarter of 2014, according to Rapaport News estimates.

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Tags: Avi Krawitz, De Beers, dealers, diamonds, premiums, price, Sights
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