De Beers first sight of 2015 closed with a value that is put at around $450 million.
The seasonally small size of this sight reflected a softening rough market with significant price adjustments that were made across the board and overall rough diamond prices declining by an estimated 4 percent, Diamonds.net reported.
There were no big changes in box assortment qualities. Sightholders said that a sizable number of boxes were deferred, representing about 20 percent of the overall sight value.
Notably, De Beers temporarily relaxed sightholder allocation rules ahead of the January sight, allowing them to defer up to 25 percent to either the February or March sight without a penalty. Sightholders reported that no ex-plan goods were made available during this sight.
“I don’t know of a single box at the sight on which people will make money,” said a sightholder from Israel. “A lot of people were complaining and said that if the rough price structure remains the same at the next sight they won’t be able to purchase most of the goods.”
Market sentiment toward the rough market was uniformly negative among sightholders and brokers, with the current price correction expected to continue until the end of the first quarter. However, some sightholders expressed appreciation that De Beers had relaxed deferral rules this month and embarked upon a gradual rough price correction to ensure market stability, the Diamonds.net report said.
“It is better that De Beers address the problem in a gradual and sustainable way instead of correcting prices in one shot,” said a sightholder from India. “Even if they lowered prices by 8 to 10 percent it will not solve the situation because it would encourage people to start speculating on rough prices again, in particular the dealers.”
That sightholder also added that the liquidity crisis in the industry would gradually improve over the next two to three months as the market regains balance and rough prices return to levels of growth.
De Beers was unable to comment on the sight due to a press blackout period ahead of Anglo American’s fiscal report on February 13. Overall, rough trading on the secondary market was slow, with almost all boxes offered at a discount or long credit terms. Brokers and buyers reported that the credit terms offered payment after 90 days on average, with 120 days terms even offered for some boxes.
In the spot market for rough, prices for similar goods are between 15 and 20 percent less compared with those quoted in rough contract sales by the major miners, according to a sightholder who requested anonymity.
Still, Mike Aggett, the CEO of De Beers sightbroker H. Goldie, said that rough market players are optimistic regarding renewed rough demand over the medium-term thanks to a confluence of supply and demand factors. On the supply side, De Beers last four sights were relatively small and rough inventory is in short supply. On the demand side, a decent U.S. Christmas retail season, a sharp reduction in polished output in Surat and an already drastic reduction in the backlog of polished awaiting grading at the Gemological Institute of America (GIA), mean that polished prices should be at or near a bottom.
Although, Aggett noted, a rough price correction could have a negative impact on polished prices if it is a sharp and quick drop.
“For a majority of companies a more significant rough price reduction would have been catastrophic for business,” said Aggett. ”However, reduced rough inputs coupled with moderate price adjustments mean clients now have the opportunity to self-regulate in terms of their decision-making and the flow of rough into manufacturing while waiting for an inevitable degree of restocking by retailers and the resultant firming of polished prices.”
