De Beers Cuts Prices at August Sight

RAPAPORT… De Beers has reduced prices of rough larger than 1 carat ahead of next week’s sight amid a gradual improvement in demand and shortages in certain categories, sources said.

The reductions are around 6% to 8%, according to sightholders and other industry insiders who spoke with Rapaport News Thursday.

“Very few people have seen their goods and received their prices, but there’s been some price alignment in areas where De Beers thought they could see what the polished benchmark was,” a rough-market source said on condition of anonymity. “De Beers wants to understand the market first before they start carefully bringing goods back to the market, which is a sensible thing to do.”

The adjustment is the first significant reduction by De Beers since before the coronavirus pandemic, as the miner has maintained price levels during the crisis to avoid flooding the market and devaluing inventories. It reported rough sales of just $56 million in the second quarter, and consequently incurred an underlying loss of $214 million for the first half of the year.

Sight participants are expecting a sales value above $200 million at next week’s sight.

An unprecedented drop in supply from miners, as well as rock-bottom manufacturing levels in India, has created shortages in select rough and polished categories, traders observed. Factories in Surat are now cautiously seeking goods to ensure they can meet demand for the fourth-quarter US holiday season.

“People are selling diamonds — at lower prices, but they’re selling diamonds,” a sightholder noted. “The Indians will start needing more rough, because the polished pipeline will get emptyish in the next two or three months, and there’s Christmas [coming].”

De Beers has discontinued its policy of allowing sightholders to defer 100% of their rough purchase allocations to later in the year, which has been in place since the March-April trading session.

“As we see some improvement in market conditions, we see it as appropriate to evolve our approach accordingly,” a De Beers spokesperson said.

The company will still offer some deferrals, the spokesperson added. Sightholders will also be able to use the buyback concession, which will enable them to sell 20% or 30% of their purchases back to the miner depending on the diamond type, sources explained.

The August sight, De Beers’ seventh of the year, officially begins this Monday.

Image: A large rough diamond of Canadian origin at De Beers’ Global Sightholder Sales operation in Botswana. (Ben Perry/Armoury Films/De Beers)