Business

De Beers July sight estimated at P6.8bn

 

The mood at the sight was mixed, as sightholders viewed the price increases as fair despite the sluggish polished market.

“I would say the mood was appropriately subdued, not particularly buoyant but not too bad either,” said one Israel-based sightholder. “Some of the small, sawable goods received a lot of attention.”

Demand for rough was strong since the July sight is viewed by many as the last chance to buy rough that can be polished in time for the important gift-giving holidays of Diwali and Christmas. Few boxes were refused by sightholders, and those goods were picked up by other buyers later in the sight. There was ex-plan – or rough that was not part of sightholders’ original applications – sold at the sight.

David Johnson, head of midstream communications for De Beers, said that pre-sight requests for ex-plan goods were fulfilled wherever possible. Johnson said demand was strong across the board at the sight, partly driven by anticipated improvement in consumer demand in the Indian market. Similarly, an ALROSA spokesperson said that the Russian miner has also observed steady demand for all categories of rough during July.

One India-based sightholder said that demand is firm as manufacturers require rough before the Diwali festival that begins on October 23. “They need about six weeks to manufacture the goods, and time to get them graded before Diwali, after which many workers go on vacation,” he explained. “So we need to buy rough now and during the next sight to have orders ready for our customers in October for the Diwali and Christmas season.”

However, despite the strong demand for rough, sightholders expressed deep concern about the tight margins created by the high rough prices and slow polished market. The RapNet Diamond Index (RAPI) for 1-carat certified polished diamonds fell 1.1 percent from July 1 to July 22 at press time amid weak trading which is expected to continue for the remainder of the third quarter. Rapaport News estimates that rough prices have increased between 8 percent and 10 percent since the beginning of the year.

Still, rough trading on the secondary remains steady with De Beers boxes selling at premiums of around 5 percent. Mike Aggett, the CEO of H. Goldie & Company, a diamond broker for De Beers sightholders, suggested that this reflected that buyers have adopted a more short-term buy and sell approach. Aggett said on his blog that buyers feel pressured to make consistent purchases of rough despite tight liquidity to ensure their future supply from De Beers.

Sightholders are in the process of applying for a sight for the next three year contract period that begins on April 1, 2015. De Beers presented its final requirements for the contract to sightholders at the July sight.

Anglo American is scheduled to report De Beers results for the first half of 2014 on Friday, July 25.