The shock that rippled through the industry on the first day of the Diamond Trading Company (DTC) Sight last week subsided when Sightholders realized that the unannounced price increases were not as sharp as first thought. However, on the downside, the interest in rough seems once again to be unaligned with polished diamond sales. Below are DTC box prices, premiums and percent price increases.

 

The DTC did raise prices. Some of it reflected the improved assortments - both in color and clarity - and some is a genuine price hike. Most of the price increases were in the mid-single digit, around 5-8 percent, with the prices of some boxes jumping by a double digit figure (see details below). There were some boxes where the prices were unchanged or decreased.

 

Demand in the secondary market was good for many of the boxes, while some boxes did not move at all.

 

Before diving into the details, one must wonder about the price hike - why now? Liquidity is a possible reason. The banks, specifically in Belgium and India, are less tight with money and credit; this in turn allows traders to buy more.

 

Another explanation and possible future issue lies in the goods. The better assortments reflect the larger share of Canadian goods, and a smaller than usual portion of Southern Africa goods. Botswana and Namibia mining operations are not completely up to speed yet. What will happen during the next Sight when supply from Africa increases and assortments are slightly lower? Will the DTC reduce prices beyond what the assortments dictate? A reduction is yet to be seen.

 

Why is there a rise in rough diamond demand if polished sales on the other end are not picking up at the same rate? Again, this is a possible outcome of the growing cash availability.

 

One insider joked about this, saying it reminds him of the children’s game musical chairs - as long as the music is playing, everything is OK. But when the music stops - someone is left without a chair. In this case, as long as you can trade the box, you're good, but once the music stops - the one holding the box loses.

 

We reported a short time ago that demand for Sight 6 neared $1 billion. Now it seems that total Sightholder requests exceeded that value. The Sight satisfied about a third of the value of requests. Additionally, many Sightholders asked to move up their requests from Sights later in the year.

 

The Sight, estimated at ~$390 million, grew as it progressed. Sightholders asked for more goods. The DTC offered various items - lots that were taken out of boxes in previous Sights and out-of-balance goods (unusual items that don’t fit into any regular box assortment). Not all Sightholders were offered the goods, but it is understood that the DTC was able to sell a large amount of goods this way – estimates range between $30 to $40 million.

 

Prices & Premiums

While Rio Tinto re-aligned prices, and prices at BHP Billiton’s Spot Market tender were up, DTC goods are priced high. Some saying too high compared to the other major suppliers.

 

There are mixed reports about the so-called "Indian goods." While early reports indicated that prices had remained unchanged or decreased, some box buyers reported extreme price hikes. List price for Makeables +5 -7 were up by some 20 percent. Gray Rejections +7 were hiked by 15 percent and Gray Rejections -7 by approximately 7 percent.

 

Makeables High 3grs +7 were priced very high, so much so that they traded below list price. IDEX Online reports strong demands for this box, however several traders said it was not a tradable box because of the price.

 

Colored Sawable boxes, were priced high as well, second only to the Makeables High 3grs +7

 

There is a shortage in a number of places: Spotted Sawables +2.5, mostly sourced from Botswana, is one such item. The larger goods in the Preparers Low is another.

 

List price of the Fine 2.5-4 ct box is ~$1,800 and for the Fine 5-14.8 ct ~$3,820, commanding a 3-4 percent premium.

 

Crystals 2.5-4 ct boxes carried a list price of ~$1,670.

 

Strong demand for Commercial 2.5-4 ct boxes drove premiums to 10-11 percent, coming on top of the ~$1,200 list price.