One of the conclusions at the recent Mines to Market conference in Mumbai last week was that the prices of rough must soften in order to protect eroding margins. According to an analysis by Rosy Blue’s economist Pranay Narvekar, the price of rough is now 22 percent higher than in 2007 while polished diamonds added just 9 percent. Despite the public conclusions, privately, traders don’t expect prices to immediately cool, expressing a willingness to pay (and charge) large premiums in the coming two months.

 

With an estimated three to five months worth of production in stock, a normal level, and the holiday season just ahead, polished wholesalers want to be ready for rising demands, and the hottest items are the smaller goods.

 

There are conflicting expectations for the level of manufacturing in India around Diwali. Some manufacturers told IDEX Online that they will take the shortest possible break, and return to work within a week. Others point to the good crops in the state of Gujarat, expecting a larger than usual number of weddings which may result in a growing number of vacation days by employees – resulting in reduced manufacturing ability.

 

With a secured and steady supply of rough diamonds, an overcapacity of manufacturing, willing banks and a hungry local retail market, the only open ended question for the Indian sector is the readiness of the U.S. market to buy diamonds.

 

DTC Sight 8

Premiums averaged 10 percent during the Sight week, cooling afterwards. Insiders say the hot demands were fueled by a false sense of shortages, with strong demand coming not just from Indian buyers, but from Belgian and Israelis as well. DTC prices were largely unchanged and the Sight totaled about $420 million.

 

The Commercial 2.5-4ct box is hard to find, commanding a premium of 5-7.5 percent, while the Cubes 4-8 gr fetched premiums of 8.5-10 percent, as the list prices of both inched up less than 2 percent. The same was for the Third Color Chips 4-8 gr box.

 

Some of the Indian goods that did see prices rise included the 1-3 Col Mxd Z +11/6 gr, with the list price rising 11 percent and the premiums adding another 10 percent in the secondary market. The Comn Rejection -10 ct box that sales for just under $9 saw its price increase by about 15 percent and the market was willing to pay an extra premium of more than 15 percent.

 

On the other end of the spectrum, the Fine Z 4-8 gr box, at $823 p/c was hot, commanding a high single digit premium but the price of the Fine 5-14.8 ct box, that was already nearing $6,000, saw its price reduced.

 

Earlier this week, DTC CEO Varda Shine said that due to the decrease in De Beers' production, the number of Sightholders will not increase in the next contract period, insinuating a decrease. Will this impact Sightholders' purchase decisions? Time will tell.

 

De Beers is yet to announce the appointment of a new CEO. A number of names are circulating, Including Shine who enjoys the support of Sightholders, CFO and Interim-Co-CEO Stuart Brown, Element Six CEO and former Bain & Company Managing Partner Cyrus Jilla, as well as a number of outside candidates. While internally people may feel some uncertainty, Sightholders seem rather unfazed by the issue.

 

Anglo-American reported today (Thursday) in a third quarter report that De Beers' production increased 15 percent year over year to 9 million carats "in response to market demand."

 

BHP Billiton September Tender - Prices Rise

Prices at BHP Billiton’s September tender mostly increased, with many items rising by 3-4 percent, such as the 2.5-6 ct white cleavage goods. The 4-8 gr White Makeables fell 10 percent while the +2.5 ct rejections gained 15 percent and the 4-8 gr white cleavage jumped 7 percent after it declined in price in the previous two tenders.

 

Gem Diamonds October Tender – High Prices

In its first tender without WWW, Gem Diamonds achieved high prices. It sold its entire run of mine production, more than 8,000 carats, at an average price of over $2,400 p/c, compared to $1,698 p/c at the September tender which included three diamonds larger than 100 carats.

 

The one stone that was not part of the October tender was the 196-carat diamond that the company's board did not decide yet what to do with. As Letseng Diamonds CEO Mazvi Manthethe told IDEX Online last month, it's considering every avenue with the goal of maximizing profit.

 

Outlook

Despite calls for price reductions, prices are expected to increase on average by about 3 percent, mainly due to the willingness to pay double digit premiums and bid high at tenders. The main price driver is the Pique goods.

 

Demand for DTC Boxes - Sight 8