Rough Market Picks Up at De Beers Sight

RAPAPORT... De Beers' November sales totalled $390 million, the highest for five months, as the roughmarket stabilized and the miner reduced prices to trigger demand.Proceeds from the ninth sales cycle fell 12% compared with the equivalent period last year, the company reported Wednesday. The figure includes lastweek's sight in Gaborone, Botswana, as well as auction sales.The slowdown was less pronounced than in recent months,as an improvement in polished prices ahead of the holiday season supportedsentiment among manufacturers. The market for De Beers' rough in the 1- to2-carat range showed a revival, while dealers were able to make a profitfrom the miner's smaller, cheaper goods for the first time in a while, notedDudu Harari of brokerage firm Bluedax in a report on the sight."We are seeing thefirst signs of recovery, with premiums beginning to rebound [on] the secondarymarket after many months of stagnation," Harari added. "Even so, manufacturersstill claim they are just about covering their expenses, with nothing left overas profit."De Beers' price reduction of "3% up into the doubledigits" boosted trading, Harari noted. The company continued to offer sightholdersflexibility to help reduce the oversupply in the midstream. However, buyers ofstones weighing 2 carats and higher were only allowed to sell back 20% of theirpurchased goods to De Beers, compared with 30% at the September sight, acustomer reported. The miner also lowered the prices at which it would buythose goods back, Harari noted."Coupled with a greatly reduced sales volume in the pastmonths, [De Beers' price cut] has gone a long way to inject a degree ofpositivity [into] the market as we approach the seasonal selling period,"commented Trans Atlantic Gem Sales, a Dubai-based organizer of rough tendersand auctions.The discounts - the first for several months - were carefullytimed to occur once the market had stabilized, thereby minimizing the risk thatpolished prices would suffer, an India-based sightholder asserted."People havereduced inventory in the last period because sales were good," he noted. "Ifpeople didn't have some relief [before De Beers reduced rough prices], maybe itwould have had a negative impact."Sentiment among rough buyers improved at the sight as polished prices showed steadiness, De Beers CEO Bruce Cleaver stated."Global consumerdemand for diamond jewelry at the retail level continues to be broadly stablebut, with midstream trading conditions still in the process of rebalancing, weoffered sightholders further flexibility during the sight to provide support," Cleaver added.Sales fell 26% to $3.6 billion for thefirst nine cycles of the year, according to Rapaport calculations basedon the miner's published results. The company holds 10 sights a year, with the final saleof 2019 scheduled to take place from December 9 to 13.Image: A rough diamond under analysis at the premises of sightholder KGK in Botswana. (Ben Perry/Armoury Films/De Beers)