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Cutters’ Profits Slim at $520M De Beers Sight
May 16, 2017 3:11 AM
By Joshua Freedman
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RAPAPORT... De Beers’ May sight closed with a value of $520 million as
buyers reported perceived shortages and said manufacturing profit margins were tight.
Sightholders estimated that De Beers had raised
prices by an average of 1% to 2%, but noted that the miner had also adjusted
the assortment of goods it was presenting — meaning that boxes were about 3.5% more
expensive than in the previous sight, one Antwerp-based sightholder told Rapaport
News.
The fourth sight of the year was smaller than the $586 million sale in March and lagged behind the $636 million De Beers reported for the same cycle a year ago.
“De Beers put out a medium-sized sight, without making extra
goods (ex-plan) available [beyond the standard contract],” a rough broker said.
“I don’t know if it’s a strategy or it’s just what’s available, but it’s had a
firming effect on the market.”
The increase in rough prices, without a commensurate
strengthening of polished prices, has had a detrimental effect on midstream
profit, another sightholder said. Manufacturers who buy directly from De Beers
and sell the goods as polished can make a slim profit, but premiums of about 5%
to 10% on the secondary market have made it hard for rough traders to break
even, he explained.
“If you can get [a margin] from the sight, it’s the lowest
single-digit profit possible,” he explained. “But at market prices, it’s impossible.
I don’t see this situation going away until the summer. It’s an unusual time of
the year to have such strong demand for rough.”
De Beers CEO Bruce Cleaver echoed the latter point in a
statement Tuesday.
“We are continuing to see steady demand for rough diamonds,
despite the industry entering a typically quieter season,” he said, adding that
“sentiment remains positive as we head towards the important Las Vegas trade
show in early June.”
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Tags:
De Beers, Joshua Freedman, Manufacturing, Manufacturing profit, mining, Rough Diamonds, rough sales, Sightholders, Sights
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