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De Beers Lets Clients Reject 50% of Goods
Aug 18, 2019 8:27 AM
By Joshua Freedman
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RAPAPORT... De Beers will allow sightholders to refuse more rough diamonds than usual at this
week’s sight, aiming to ease pressure on the market without reducing prices.
Clients will be free to turn down 50% of available goods amid a slump in rough demand, a broker told Rapaport
News on condition of anonymity. The company will also buy back up to 20% of
customers’ purchases, compared with the standard 10%, he added.
Unlike rejections, buybacks involve customers acquiring the
diamonds, and then selling them back to De Beers at an agreed price. They are beneficial for sightholders, because the original purchase counts toward their “demonstrated
demand” — the track record of rough-buying that De Beers uses to determine future
allocations, the broker explained.
The concessions are new for the August sight, which begins
Monday, and are part of De Beers’ recent efforts to increase flexibility for
manufacturers and traders struggling with an oversupply of rough and polished.
Revenues from the sale are likely to be much lower than the $503 million the
miner recorded during the equivalent cycle last year, the broker predicted. De
Beers will report the total next week.
“[This] is a measure where they…try to maintain rough prices
where they are, and where they should be…and help the midstream digest the
polished overhang,” the broker noted. De Beers prefers to limit sales volumes
rather than reduce prices, as discounts on rough can lead to retailers and jewelry
manufacturers requesting lower polished prices, he observed.
In July, sales fell to their lowest level since late 2015,
as sightholders rejected large quantities of rough. De Beers offered buyers
extra deferrals of goods to later sights, and brought forward the annual
opportunity for customers to reschedule their purchases.
“We have offered customers additional flexibility during
sight sales to help manage short-term issues relating to higher-than-normal
polished-diamond inventories in the midstream,” a De Beers spokesperson said.
Image: Rough-diamond sorting at De Beers’ Global Sightholder Sales operation in Botswana. (Ben Perry/Armoury Films/De Beers)
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Tags:
De Beers, demonstrated demand, Joshua Freedman, mining, Rapaport News, rough, Rough Diamonds, Sightholders, Sights
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