DTC end in sight - analyst

Brian Benza
Staff Writer | Friday February 19, 2010 00:00

 

In an interview with Israeli diamonds, a well known diamond industry analyst and journalist Chaim Even-Zohar says he believes that De Beers as a producer is not going to lose its dominance in the market easily in the near future but three or four mining companies will still control some 70 percent of the market in the foreseeable future.

' Dominance of De Beers and the other big companies is not going to change so quickly. What will continue to change, however, are the rough diamond marketing structures. We will probably see the end of the Diamond Trading Company within a few years.

' We will also most likely see that the governments of Botswana, Namibia and South Africa will control their own marketing mechanisms, just as the governments of Angola and Russia are doing today.

'Rough diamond marketing may ostensibly be in the hands of private companies, but it will definitely be more government-controlled,' said Even-Zohar.

Presently De Beers, through the Diamond trading company controls the marketing and selling of all rough diamonds from its Joint venture mines in Botswana, Namibia, and South Africa and from its new mines in Canada.

 Evan-Zohar went on to say that the dismantling of the cartel has created a power vacuum that is now being filled by governments. 'For instance, in the future, diamond players in Tel Aviv will increasingly need to interact with foreign government officials.

' During the crisis of the last years, some industry old timers longed to return to the good old cartel days. These are gone forever,' he said.

Already the Botswana government and De Beers have been haggling for the past few years over the local marketing and beneficiation of diamonds mined in Botswana.

In a bid to become a world diamond-trading centre, Botswana is trying to break the DTC monopoly and create an alternative diamond market system, which analysts believe will give better value to Botswana diamonds.

The DTC contract with De Beers comes to an end in December this year and government has in the past year openly expressed its intention to open a parallel selling and marketing system of diamonds.

With negotiations for a new sales agreement between Government and De Beers fast approaching, DTC is most likely to lose its monopoly over Botswana diamonds as there has been pressure from emerging diamond industry players such as India and China to be considered as third party competitors.

Asked on whether rough diamond prices will keep on rising, Even-Zohar says that Rough diamond supplies have quadrupled in the last 30 years, but the diamond jewellery market has grown far less as rough diamond prices have fluctuated widely and in many categories.

'We are below the 1989 record levels. A few months ago, someone made a comparison between the Rapaport Price Lists in 2003 and in 2008; in many areas, prices were higher in 2003. So we are really deluding ourselves if we believe that diamond prices will continue to rise,' he added.