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DTC June Sight Estimated at $540M

Tight Liquidity Brings Weak Rough Trading

Jun 13, 2012 8:14 AM   By Avi Krawitz
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RAPAPORT... The Diamond Trading Company's (DTC) June sight had an estimated value of $540 ‎million. The De Beers rough distribution company made slight adjustments to prices and ‎assortments that enabled the boxes to maintain their value. DTC reduced prices on some ‎boxes and increased prices on others.‎

Sightholders reported weak trading in the secondary market with most DTC boxes selling ‎at list or below list prices. ‎

‎“There’s no appetite for rough at the moment,” said one sightholder. “There is no cash in ‎the market and there is just no profit on these goods.”‎

Most sightholders that spoke with Rapaport News noted that liquidity is tight, particularly ‎among Indian diamond manufacturers who have been impacted by the recent ‎depreciation of the rupee against the dollar. The rupee has lost 13 percent value since ‎February and traded at INR 55.6 to the dollar at press time on Wednesday.‎

One Mumbai-based sightholder explained that most companies have their bank credit ‎lines in rupee, which has resulted in losses when they convert to dollars in order to make ‎their rough diamond purchases. ‎

The weak market fueled expectations that some sightholders will have to refuse goods by ‎the end of the week, or would do so at future sights. “People are not happy with the price ‎and I think there will be refusals,” said another sightholder.‎

Louise Prior, the head of sightholder services and communications for DTC, ‎acknowledged that the mood is quiet and that there are challenges in the market. “There ‎are deferrals at every sight but so far the goods are going through,” Prior said. “We are ‎confident that we can sell our production.”‎

De Beers continues to operate its mines at below capacity, limiting supply to cater to the ‎softer market. First quarter production fell 16 percent year on year to 6.208 million carats. ‎DTC sales have declined by 19 percent to approximately $2.83 billion in the first half of ‎‎2012, according to Rapaport estimates. ‎

Prior stressed, however, that the company still expects a stronger second half of 2012 ‎than the first half, adding that the recent JCK Las Vegas show indicated resilient demand ‎in the U.S. ‎(Watch DTC's Varda Shine comment on second half outlook.)

Similarly, sightholders reported that polished demand is stable but noted that there is ‎growing pressure among companies to lower prices. “You’re only as strong as your ‎weakest link and a sharp buyer can always find a supplier under ‎pressure to pay DTC or ‎ALROSA and therefore willing to sell cheap,” said one sightholder. “Rough is expensive in ‎relation to the resulting polished. It’s just very difficult to profit in this market.”‎
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Tags: Avi Krawitz, De Beers, Diamond Trading Company, diamonds, DTC, Rapaport
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