De Beers: Fixed-Price Forward Contracts Moving to Core Business Status

(IDEX Online) – De Beers says its Auction Sales business is to transition Fixed-Price Forward Contracts to core business status, following the success of the pilot program that was launched in January 2017.

Fixed-Price Forward Contracts offer the opportunity for Auction Sales customers to secure guaranteed access to bespoke future supply contracts, with certainty over the price to be paid when each contract reaches maturity, the miner said.

Originally developed in response to customer demand for short-term consistency of supply, De Beers’ Auction Sales business transitioned away from the prior floating price forward sales mechanism and has experienced increased customer demand for its fixed price mechanism, especially from businesses in Belgium, India and Israel. A total of 222 Fixed-Price Forward Contracts were sold during the pilot, with total forward contract sales accounting for 10 per cent of Auction Sales’ revenues in 2017.

Neil Ventura, Executive Vice-President, Auction Sales, said: “The results from this pilot have been very encouraging, and have validated our understanding of customer needs and that the solution we have been testing meets those needs effectively.

“Coupled with the investments we have made to offer one of the industry’s most consistent product offerings, we are now ready to transition the fixed forwards program to the next stage in its development by offering a broader range of highly consistent products over longer contract maturities, with flexible supply options up to five months into the future.”

From January 2018, customers will experience a wider range of products being made available for one, two, three, four and five-month forward deliveries, enabling them to create bespoke supply contracts to suit their business needs, De Beers added.