De Beers gives hard-pressed buyers leeway
DE BEERS, the world’s largest producer of rough diamonds by value, has for the second time this year made deep adjustments to its sales terms for its clients in a weakening market.
Diamond cutters, normally large buyers of rough diamonds in July and August to prepare for year-end sales, “are refraining from doing so”, said Rapaport, which publishes an industry standard diamond-pricing list.
Jewellers were tapping into excess polished diamond inventory for the holiday season.
“Diamond prices fell in July as market sentiment fell to levels not seen since the 2008 downturn,” Rapaport said on Wednesday.
De Beers lowered its full-year production forecast to between 29-million and 31-million carats from 32-million to 34-million carats to adjust for weak market conditions, CEO Philippe Mellier said last month.
Rapaport said: “It will take more than low supply to stimulate rough trading and diamond market activity”. It called for rough prices to drop “significantly” to boost cutters’ and polishers’ profit margins and “lift the general market from its crisis”.
De Beers had lowered rough diamond prices by 8% this year, Bruce Cleaver, the executive head of strategy at the company, said.
In the July sale hosted by De Beers, called a sight, the company allowed 84 handpicked buyers to roll over a quarter of the diamonds on offer rather than compelling them to buy everything on offer.
For the August sight, De Beers will permit buyers, called sightholders, to defer up to 75% of their sight, with an option to buy them at any of six remaining sights this year and the first three next year.
“We’ve done this as we recognise that it’s a challenging period for our customers and this provides them with a lot of extra flexibility during this time,” said company spokeswoman Lynette Gould.
“This, coupled with the continuing support we will provide during the rest of the year, will, we hope, help provide a platform for better industry prospects in the second half of 2015.”
Rapaport said sightholders had rejected 65% of diamonds in the July sale. But the figure is closer to 50%.
“Rough prices are unsustainable due to the significant gap between rough and polished prices and are likely to fall as sightholders are preparing to refuse unprofitable rough again in August,” Rapaport said.