“We appreciate that it is currently a quiet period for trading and at sight 6 all sightholders will therefore have the option to defer up to an additional 25 percent of their total allocation (excluding whole boxes of ex-plan), per [the] intention-to-offer delivery location,” according to a De Beers notification to sightholders.
De Beers enabled a similar mechanism in the first quarter, preferring to reduce supply and maintain stable rough prices than implement sharp price cuts. The company’s rough sales fell 28 percent year on year to $2.5 billion in the first half of 2015, according to Rapaport estimates ahead of official results scheduled for July 24.
Sightholders are expected to take up the option and reject a large volume of goods at the sight as manufacturing sentiment is weak. Indian cutters this week rejected a call for a one month ban on rough imports, opting instead to exert self-discipline in their individual rough buying in the ongoing sluggish market.
One sight participant, speaking on condition of anonymity due to the sensitivity of the matter, noted that manufacturers are under pressure from several factors. “Polished prices continue to fall and rough is expensive, banks have reduce credit, China’s stock market crashed and the Greece situation is also affecting industry confidence,” he said.
The participant said sightholders saw the notification as a signal that De Beers will keep its average prices basically stable at the July sight.
Manufacturers have until now endorsed De Beers strategy to hold rough prices steady and lower supply. Members of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) stressed at the June presidents meeting in Tel Aviv that a sharp rough price cut would depress sentiment and influence polished prices to drop further.
However, there is lingering concern about future sights and sightholders’ ability to profit from rough. Sightholders are expected to take the deferred goods later in the year as they prepare their inventory for the fourth quarter holiday period.
“The August sight is going to be a big sight and the feeling is that De Beers is going have to reduce prices at some point,” the sight participant said. “They’ll tweak some boxes in July, but they should really reduce prices by 20 percent. They’ll have to do it at some point given the market conditions.”