IDEX Online Rough Diamond Market Report: Calm in December

After a couple of busy months, December was relatively subdued in the rough diamond market.

The Diamond Trading Company's (DTC) Sight 10 was typically non-climatic. At $250-$275 million, the DTC stuck to the ITO and turned down all applications to supply January's requested goods or even Ex-Plan goods. The DTC told Sightholders their declines are due to limited supply, however some believe that they have goods – and will hold them until January, when prices rise. More about that later on.

The limited supply created a feeling of shortage, which translated into premiums. In some cases, such as third color rejections, non-pique and many of the spotted goods, double digit premiums were paid, ranging from 12 to 17 percent. Some market talk claimed premiums yielding more than 20 percent.

Makeables -5-3 and makeables low enjoyed rising demand. Boxes of 2.5-4 carat goods, a broad range, have generally commanded 8-10 percent premiums.

Prices increased somewhat, though it was not clear by how much, as the makeup of many boxes was changed. Small 'Indian' goods were reportedly up by 6-7 percent. Spotted goods were hiked by 3-4 percent.

But that is just part of the story. Many of the rough purchases this week were speculative ones. Goods bought from the DTC and Alrosa were offered with higher premiums, often to be turned down. Instead of lowering prices, some of the goods are still looking for buyers, while the rest were put in the safe until January.

Future Price Increases

Many in the market believe that rough diamond prices will continue to rise, headed by the producers themselves. The continued head-shaking at the  disconnect between rough and polished diamond prices does not take into account an important fact – that there is still room for more price increases before manufacturers' margins erode completely. Rest assured – complete margin erosion will not take place.

According to Robert Gannicott, CEO of Harry Winston Diamonds, the price of their Diavik goods was about 9 percent lower in the last quarter than in the same period last year, while prices remain about 13 percent below the highs achieved during 2008 before the decline. In other words, there is room for further price increases.

Demand for DTC boxes after Sight 10