According to Rapaport, De Beers sold an estimated $420 million worth of rough at the Diamond Trading Company (DTC) October sight as prices and assortments remained relatively stable. Reports indicated that demand for rough was being fueled by the secondary market as premiums on DTC boxes increased from September. Market sources estimated that premiums are selling at an average 7-to-9 percent.
“Demand is coming from the secondary market which is still willing to pay a premium for rough,” said one source. “It is a rough sellers market, which does not make sense since polished is not moving and the rough is expensive.”
Reports point to good demand, particularly from India, for 2.4-to-4 carat and 4-to-8 carat rough diamonds, while demand is lower for the more expensive larger stones.
One sightholder suggested that De Beers is artificially drying up the market in order to ensure stronger demand in January. “They’re banking on manufacturers keeping small inventories through the rest of the year and then giving a stronger push in 2011,” he said. “So we’ll see if they are reading the market correctly.”
De Beers adopted a cautious approach to bringing production back to speed after scaling back in 2009 and has said it expects output to reach around 31 million carats this year, representing an increase of 26 percent from 2009. Rapaport estimates that DTC sales increased 49 percent to $3.8 billion during the first 10 months of the year.
DTC spokesperson Louise Prior noted that there was some conflicting feedback coming out of the market with some suggesting demand was being driven by less availability and others implying there was plenty of rough on the market. Prior added that she did not foresee any major price adjustments before the end of the year.
However, some said they anticipate more aggressive price policy from the company as sightholders will start to participate in the Diamdel online auctions from October. “There is a feeling that everyone will participate in the auction both out of a desire for rough and as they try to win favor with DTC,” one market observer said. “So there is a bit of a political game being played around the auction.
Prior said DTC has been very clear with sightholders that their participation in the auctions will not affect their relationship for now. Only at a later time, during the 2012 contract period, when feedback from the auctions will be considered to award additional supplier of choice (SOC) contracts, will the interplay between Diamdel and DTC be more relevant, she explained. “For now, the sole benefit is to provide additional access to rough,” Prior added.
Diamdel will present the stones being auctioned online for viewing in Antwerp and Tel Aviv and a portion in Hong Kong in the week before the sale.
