Sahar: No Reason for Market Nervousness
August 29, 11
(IDEX Online News) – De Beers and the Canadian diamond producers will maintain their current prices and supplies until the end of the year, the president of the Israeli diamond exchange claims, hinting that prices of rough diamonds won’t increase.
“Polished prices are still 15-20 percent below the prices of
rough, and are supposed to move up,” according to IDE
President Sahar (above).
Yair Sahar, the newly elected president of the IDE, was responding to concerns about the state of the diamond market, where prices of rough diamonds increased by 50 percent since the start of the year, while prices of polished diamonds are increasing at a slower paced.
Sahar expressed optimism about the future, saying he met with the CEOs of De Beers and DTC, Philippe Mellier and Varda Shine, who told him they see no reason for the nervousness felt in the diamond centers.
Calling tenders “destructive and harmful,” Sahar views the recent 20-21 percent drop at the last BHP Billiton tender as a warning against the prevalence of the tender system. This is not a common sentiment in the market which considers BHP’s tenders a bellwether indicator for demand.
The Greatest Difficulty Is Financing
If rough diamond prices increased by 50 percent, manufacturers need to raise an additional $6-$8 billion to buy rough, this requires bank financing, Sahar states. During the 2008-09 recession, banks in India provided long credit lines, however that stream slowed down, and therefore traders are suffering from liquidity difficulties. The result, according to Sahar, is polished price declines to generate a cash flow and finance rough diamond purchases.
Sahar emphasized that this is an inner trade phenomena that does not reach the retail market, which is enjoying strong business. “We, the Diamantaires need to act responsibly and understand that technical corrections of a few percentage points are a natural, healthy and logical occurrence in an open and dynamic market,” Sahar states.
Retail Demand Growing
Citing the excellent results of Tiffany and Signet as well as the reported double-digit retail sales increases in the U.S., China and India since the start of the year, Sahar believes that he has good reason for his optimism.
“Polished prices are still 15-20 percent below the prices of rough, and are supposed to move up.”
Knowing that the price of rough won’t decrease and that there is reason to believe that that holiday season, Chinese New Year and Diwali sales will be large, “I have no doubt that we can be optimistic and sure that the market will stabilize,” Sahar reassured.