Rough Prices Are All Over the Place

It’s DTC Sight week - the first Sight of the year - but there isn’t a festive mood in London. Prices are up on many goods, some boxes have lower color, but Sightholders are displaying unhappiness at something different – the service tax the DTC is planning to impose on its clients.

2.5 to 4 carat SLG boxes (sawable) were up 4 percent but prices on some goods actually softened, as with the 2 to 4 carat spotted (pique) goods with a reported 1.5 percent decrease in price. The price of -3 to 5 grainers mix crystals and 2 to 6 grainers cleanish goods was unchanged, but Sightholders complained that some boxes of bigger goods had much lower color creating a de facto price increase.

Buyers said the changes in price are spread all over. Sight size is estimated at around $700 million, a big sight as usually happens at the start of the year.

Premiums on the market did not come easy. With a market in many ways on hold, high stocks and limited liquidity, rough traders are not in a rush to buy DTC goods and the 12 percent premium one trader said that was paid for a +5 carat box seems unusual.

But prices aside, the big event was the presentation by Sales Director Varda Shine. The service fee was discussed there and the DTC top brass found out that their clients are not happy. The service fee, referred to in the press in recent weeks as a marketing tax, will be collected for the package of services Sightholders receive from the company such as the ITO, marketing, etc.

While the two percent figure has not been confirmed, Sightholders in their feedback responded negatively to it. For instance, why do they need to pay for marketing that they can’t decide about, and that will best serve DTC needs rather then those of individual firms and their marketing plans?

Another point of contention was how to pass the cost. If the DTC would add the cost to the price of its rough, Sightholders could pass it o their clients, but since it is the cost of doing business with De Beers, they are stuck with it.

Oddly, DPS marketing tools such as research are not included in the fee and will cost extra. This rubbed the listeners up the wrong way.

With Sightholders enjoying the services equally, some thought that a percentage based fee was wrong, suggesting a flat fee that would be reasonable for the small guys too would be a better approach.

In any case, even if the message was clear, the DTC is not expected to make any major changes in the new Supplier of Choice policies, or as one industry insider described it, “the DTC will need a serious PR effort” to sell it to Sightholders. Someone else said Sightholders will complain but “at the end they will shut up and pay”.

Elsewhere, Rio Tinto continued offering their goods at reported high prices, and Diavik co-owners Aber is slowly losing its ‘good guy’ reputation. Sharp changes in pricing, with one buyer complaining that prices have fluctuated wildly in the lower double digits, seems to be hurting the company in recent weeks.

It looks like it’s going to be a hot year for the rough diamond market.