DTC's March Sight Estimated at $420M

| Monday March 29, 2010 00:00

'We were very happy with the sight,' said one sightholder. 'We are finding that DTC at list is the best buy on the market today. The more you see of outside goods, the cheaper DTC looks.'

At its February sight, De Beers pledged to keep prices stable in the short term, barring 'any further major changes in market conditions.' Sightholders said they expect this stability to last until at least June, when the JCK Las Vegas will be held.

Similarly, last week, senior ALROSA officials indicated that the Russian miner is focused on ensuring near-term rough price stability. The company's vice president, Sergey Oulin, told Interfax that the recent surge in rough prices could have a detrimental effect on the industry. The latest rally in rough 'does not look very convincing' when viewed in light of the demand for polished diamonds and diamond jewellery, he explained.  ALROSA recently signed agreements to supply $490 million worth of rough to three Indian manufacturers over the next three years, whereby prices will be reset on a quarterly basis. The company is currently in negotiations regarding a similar $300 million annual supply deal with the Israeli diamond industry.

Still, DTC sightholders reported high premiums for rough on the open market, stressing that the tender system was driving prices up. Reports indicate that BHP Billiton prices increased by an average of 2 percent to 3 percent at the company's March tender. Des Kalilea, an industry analyst at RBC Capital Markets, wrote in a March research note that diamond miners were still achieving good levels on sales, 'despite the expectation that rough prices may have risen too far, too fast.' He stressed that 'While global economic indicators are ambiguous, China remains a firm market for rough and the absence of significant selling from the majors suggests that softness in prices could be limited.'  Before this week's sight, De Beers presented sightholders with their intentions to offer (ITOs) for the 2010 to 2011 sight cycle. Sightholders indicated that the London ITOs increased by an average of 25 percent on a year-to-year basis, but were still well short of their 2008 to 2009 levels. Large quantities were allocated to Botswana and South Africa, they said.  Sight participants noted that the ITOs were the focus of this week's activities, with one sightholder adding that 'the sight was a bit of a non-event.' Another sightholder added that manufacturers are now focused on their applications for the new contract period, which is scheduled to begin in April 2011. De Beers is expected to inform applicants of their new requirements in the coming months. DTC spokespersons could not be reached for comment at press time. The March sight was the smallest of the calendar year so far, as De Beers released large quantities of rough into the market in January and February. Sightholders explained that they had delayed part of their ITOs through 2009, with the result being that larger sights were conducted toward the end of the sight cycle. Rapaport News estimates indicate that DTC's sales rose to $1.5 billion in the first quarter of 2010, compared with $529 million in the same period of 2009, when the rough market was under great pressure due to weak demand. ( Rapaport News)