The Diamond Trading Company (DTC) is holding a pilot sales opportunity this week, just a week after Sight two took place. The goods on offer are mainly diamonds that were refused at the Sight and the buyers are Sightholders who have expressed great interest in buying goods that are otherwise not available to them from the DTC. The reason for their enthusiasm is simple – there are sales, deals and even some optimism.

 

Prices at last week's Sight two were better than those at Sight one, although Sightholders complained that prices were above market level. This is somewhat surprising, considering that at the end of Sight one in January, most agreed that prices were fair.

 

There are two plausible explanations for the complaints: either the new, more generalized assortments initially threw Sightholders off or the current voices reflect a means of communicating – and negotiating – with the DTC via the press. A third option is that traders see they can resell goods and are acting to raise margins.

 

Be it as it may, talking with Sightholders over the past few days revealed something that had been missing for some time – a tone of optimism. This is not to be mistaken for an irrational view of the market, but several months into the crisis, human nature knows how to adapt and seasoned traders are finding their way through the limited credit, higher interest rates and dismal sales, and are feeling better about the situation.

 

Banks have severely cut credit to the industry. Union Bank reported that Israeli banks cut credit by 21 percent (!) between October 2008 and January 2009. In addition, a number of banks have reportedly refused to finance Sight purchases.

 

The uber-cautious banks, however, have found their clients turning to other banks, where the necessary backing could be found. The banks state that competition among themselves is decreasing, but an undercurrent of "grab-a-needy-Sightholder-and-win-a long-term-client" exists as well.

 

Demand for goods at Sight two saw a slight improvement, especially commercial 2.5-4 carats and white Melee type rough as well as Makeables High 3 grainers +7.

 

Goods producing 1 carat and smaller in SI and below qualities, even in lower colors, saw prices rising 3-4 percent. Prices of similar goods producing 2 and 3 grainers are stabilizing. The larger, expensive goods were often left on the table, as demand for their polished is still very weak and well below price. As a result, prices for this range of rough are far below previous prices. One trader said 60-70 percent below.

With supply at the Sight well below the original ITO (Intention To Offer), some are saying that the ITO is not really in effect anymore and is merely relegated to serving as a general guideline.

 

Nothing underscores this as the second Sight week (Sight 2 times two? After Sight?), a by invitation-only affair. The DTC has offered Sightholders the chance to apply for extra goods to be offered on a first-request-first-serve basis. Requests were open for any type of goods, regardless of a Sightholder’s ITO.

 

“This is the first time we have tried this and we are running it as a pilot this week,” DTC spokeswoman Louise Prior said. “We welcome feedback from the Sightholders and will then decide whether to continue in this format in the future but too early to tell just yet.”

 

Considering the tough economic situation De Beers is in, there must be a lot of pressure on the DTC to generate an income. Trying to balance this with going easy on the Sightholders must feel like walking a tightrope. Turn too much in almost any direction, and a long, painful plunge will follow.

 

Against this backdrop, De Beers Managing Director, Gareth Penny, and DTC Managing Director, Varda Shine, walked the halls and sat with clients during the Sight, something Penny has largely refrained from doing, until now. One Sightholder felt Penny wanted to ensure as little as possible was left on the table.

 

According to Prior, the second Sight week is one of many initiatives the DTC is looking at to support Sightholders during these challenging economic times. It is also a good way for the miner to generate a little extra income at a cash flow-challenging time.