Large Sightholder Applications for Sight 9 Attest to Strong Rough Diamond Demand

Strong demand for rough diamonds has propelled Sightholders to submit large applications ahead of Sight 9. The total level of additional applications is estimated at triple to five times the ITO, the pre-determined allocation for the Sights, believed to be around $300 million.

Sightholder additional applications, the requests Sightholders submit to the Diamond Trading Company (DTC) ahead of a Sight asking for extra supplies, are not all approved. Approvals depend on availability. However, considering that 2009 was a financially weak year and that Sight 9 is usually a small Sight, the high level of applications is somewhat surprising.

Industry insiders expect Sight 9 to eventually total about $350 million.

It is understood that most of the additional applications are by rough diamond traders and Indian Sightholders with large manufacturing operations.

The applications therefore attest to two trends in the industry: rising rough diamond prices and busy polishing facilities in India’s manufacturing center, Surat. Manufacturers recently confirmed to IDEX Online that they are actively purchasing goods in the secondary market - including Sightholders that found that the DTC’s supply fell short of their manufacturing needs.

Diwali vacations are planned to be cut short by many manufacturers who want to return to work as soon as possible. This is contrary to the past when manufacturers tended to extend their holidays - as they takes place after the major rush for the November- December holiday season.

One possible reason for the flurry of polishing is China, more specifically, a healthy demand by a country that was not as hard hit by the economic crisis. In February, the Chinese New Year will be celebrated, and the hopes of many are for a large level of diamond jewelry gifting. If China will rise to the occasion, the diamond industry will enjoy an infusion for much-needed cash.

In the meantime, there are reports that Indian banks are stepping forward, providing longer credit lines to polished exporters as well as providing credit lines to smaller clients that only manufacture - and don’t export at all. This indicates that banks in India are willing to provide some financing of diamond stocks, something most diamond-financing banks have turned away from in the past year.

The rising availability of cash is fueling the pursuit of rough diamonds among buyers. Traders in Israel and Antwerp have reported rising prices in the past couple of months, especially in the past two weeks. So much so that buyers are starting to complain about real shortages while noting that the rising prices are again out of line with their resulting polished.

Complaints aside, traders will continue to buy high-priced rough as long as they can make a nice profit by making a quick sell.