De Beers: The Times They Are a-Changin'
January 21, 21
There's a new president in the White House, there's a new weapon against the pandemic and the times, as Bob Dylan put it back in 1964, they are a-changin'. There's no "one-size-fits-all" way to sum up the mood of eight billion people across our planet. We all have our own worlds, determined by where we live, who we love, how we fill our days and the values we hold dear. But despite our many differences, we are collectively affected by certain landmarks events. They are key moments that signal change, be it globally, nationally, or among a particular group of people with shared interests. One of those moments took place yesterday when Joe Biden assumed office as the 46th US president. Change is in the air as he adopts a very different agenda and a very different approach to his predecessor. Across the world many countries have had their own moment in recent weeks as they started rolling out their vaccination programs against coronavirus. It'll be a long haul, but at least the fightback has begun.
In our own world, that of diamonds, change is also in the air. De Beers, the biggest supplier of diamonds by value, has announced a radical and long-awaited review to the way it does business. One of the biggest drawbacks of the current "take it or leave it" sights system is that holders can end up selling a good chunk of their box because the stones doesn't suit their needs. De Beers is addressing that by tailoring its new three-year contracts more precisely to the requirements of three categories of sightholder - integrated retailers, manufacturers, and dealers. This would put rough diamonds into those best able to add value to them. It's also been suggested that sightholders will be offered a more customized selection, enabling them to actually use the contents rather than simply flipping their boxes.
But it also means that not every sightholder will retain their place at the top table. Membership of the exclusive club has been shrinking in recent decades. In 1986 there were well over 100 traders, cutters and wholesalers. In those days, the the Central Selling Organization invited them to a tender every five weeks in London and, much like today, it offered them a box of assorted stones at a set price on a take-it-all or leave-it basis. Over the next two decades De Beers whittled that list down to 93 and in 2013 it moved the sights to Gabarone, Botswana. The figure now stands at 80, and sources indicate that as many as 10 of the current sightholders could be about to lose their status. De Beers announced last July that it was embarking on a huge modernization program that would affect all aspects of the business, sights included. It's possible others may follow suit. Alrosa, which has offered unprecedented flexibility to its long-term clients for the last seven months has extended their current contracts for an extra three months. It says it recognizes the difficulties buyers face committing to the Alrosa Alliance, its long-term supply arrangement. Dominion Diamond Mines and Rio Tinto also operate contract sales. De Beers is addressing a discontent that long predated the current coronavirus pandemic. Today's problems have served to highlight the need for reform, and may have been a catalyst, but they are not the root cause. The De Beers changes are designed to iron out wrinkles in the current pipeline and represent evolution, rather than revolution.