Rapaport recently reported that Diamond Trading Company’s sight 9 had an estimated value of 325 million USD, which was roughly the same to that of the same period last year.
The De Beers’ diamond trading arm noted that the final two sights of 2009 would be smaller as the giant diamond miner still had goods that need to move through production, as it limited output from late 2008 through the second quarter of 2009.
Rough & Polished’s African Bureau Editor Veronica Novoselova talked to Namibia Diamond Trading Company (NDTC)’s marketing manager Paulus Shituna, who noted that the firm had managed to weather the rough storm in the diamond industry, which was brought about by the global economic downturn.
He said NDTC had to cut on cost by streamlining its workforce.
Shituna said though an increase in polished prices had been registered as the festive season was in the offing, this was not a reflection of a full recovery of the industry.
Below is what we gathered from the NDTC marketing manager:
What is your company’s financial and operational highlight for the year 2009?
In 2009, we focused solely on making sure that NDTC survives the storm we faced and the highlight was obviously that we can see that the crisis is coming to an end, we are still very, very cautious, but the mere fact that NDTC survived this crisis was a focus for 2009. We lost (retrenched) some of colleagues (employees) in the year, but that was part of refining and re-aligning our structure to renewed business environment requirements, just for us to make it through 2009.
Are there any plans to increase the volume of rough diamonds sales on the market in 2010?
If you look at what we are selling at the moment you will notice that it is not enough for the market, there is still a lot more demand for diamonds out there. We have not made a [projection] on whether we are going to increase or not, that we will be assessing until the end of the year to see what levels of diamonds we are going to provide for next year, but it is fair to say that it will be on an upward trend, but for how much? I do not know, for we will have to do our analysis later, but we will know where exactly we will be standing towards the end of the first quarter next year.
What do you think about, whether or not, any measures are going to be taken in order to support demand for rough diamonds and prevent speculative inflation, which may result in a price drop?
I am glad that all the diamond companies in the world are returning at least to the pre-crisis performance, but am not convinced that the crisis is over yet. We have to be cautiously optimistic, but if you look at the news reports coming from the US, you realise that its economy did not perform as expected. You look at reports coming out of Europe, the UK for example, you will see that its economy contracted in the previous quarter, so even though we believe that the crisis is coming to an end there is still reason to be very cautious. We are not through yet, the market is still fragile.
What is the reason behind a recent higher demand for rough diamonds despite the almost flat polished market?
Well, one would obviously like to comment on the behavior of all the diamonds companies during the crisis. I think if we had behaved irresponsibly it would have hurt the whole market. As family member of De Beers, we took a very cautious step, as we aligned our availability to the prevailing demand, and I think most of the diamond companies also took the same strategy to make sure that we do not hurt the prices of diamonds too much, as flooding the market with diamonds meant prices would go down.
For the long term, we are going to maintain the current levels to make sure that prices continue remain where they are or go up.
Do you consider this trend to be long-term?
In terms of the higher demand for rough diamonds, it is mostly on the low side, whether there is either a real or perceived gap, but we all know that there has never been any major diamond discoveries over the last few years or last two decades, so there is a gap between demand and supply, but I think what is happening now, shows that there is a gap between the manufacturers and what they wanted to work in their factories to prepare for the festive season. I think that is what is driving the demand at the moment, as you can see that steadiness of prices for polished diamonds, does not mean that prices will remain flat. So it is more in terms of us stocking and de-stocking. People have finished the stock they had before and they just want to replenish their stock before the start of the festive season, as you know about 40 percent of diamonds are used during the last quarter of the year. Hopefully this new high level of demand does not lead to speculative behavior.
How do you evaluate the current prices for rough diamonds, are they fair?
It depends from which perspective you are looking at it, if you are looking at it from a producer’s perspective, there are nowhere near the levels we had between June and July 2008, so obviously those people that are banking looking at those prices have seen that the prices at the moment are very, very low. However, if you look at it from a manufacturer point of view they have seen that these are prices (current) they can defend, as they would say the June, July prices of 2008 were considered highly speculative, so it depends on whom you are talking to and its difficult for these people take a number of factors in consideration when they decide whether the prices of diamonds are fair or not. However, from an NDTC point of view, I would say, it is not where we would want to be but we can differ on prices.
Will it be correct to say that the crisis in the diamond industry is over?
I cannot definitely say the diamond crisis is over, what we can say is that the only thing that has returned in the market is stability; it is more easier to work in the market now as opposed to October last year and January this year.
Given this crisis in the diamond industry, do you think the sight holder system still works?
I think the sight holder system is still good, what we need to do in terms of dealing with a crisis period is just to bring in a bit of flexibility into the system and it will work. We have actually introduced some levels of flexibility into the system to and meet the requirements of our clients.
How many carats did you sell this year at your sights?
We do not discuss numbers, as to how much we have sold to sight holders, but as you know for Namibia the target is about 150 million USD.
Veronica Novoselova, Rough&Polished African Bureau editor in Namibia
