De Beers Raises Rough Prices Again

RAPAPORT… De Beers sold $550 million worth of goods at its May sales
cycle as strong consumer demand boosted the rough-diamond market.




The miner raised prices for the third consecutive sight amid
the strong demand, with the emphasis on larger categories, sources told Rapaport
News. De Beers made certain price changes by adjusting the way it sorts stones
into boxes, a rough-diamond broker noted.



“We saw robust demand for De Beers’ rough diamonds,
reflecting continued strong demand for diamond jewelry, especially from
American consumers, as we head toward the important JCK Las Vegas trade show
at the start of June,” De Beers CEO Bruce Cleaver said Tuesday.



Proceeds were 5% higher than the April sales cycle, and also
5% above the value of De Beers’ equivalent cycle a year ago, the miner reported.




Dealer premiums — the markup at which traders can sell De
Beers rough on the secondary market — crept up to 4.9% in May from 4.4% in
April, according to a report by Dudu Harari of diamond broker Bluedax. Rough
diamonds are in short supply, prompting traders to ask for higher prices on the
secondary market, Harari added.



However, midstream profits remain low as the increase in
rough prices does not correspond to polished demand, even amid positive
consumer sentiment, sources noted. The RapNet Diamond Index (RAPI™) for 1-carat polished increased 2.8% in the first four months of the year, but was 1.3% lower than a year ago.


“While the market for rough continues to be firm, mostly due
to shortages, profitability remains a challenge for manufacturers,”
Harari said.



A continuation of the upward trend for rough prices could
mean manufacturers’ polished sales don’t even cover the cost of buying and processing
rough, the CEO of an Israel-based sightholder told Rapaport News.



“Margins are very, very tight,” the sightholder said. “We
had profitability in the first quarter, but now it’s shrunk to zero. If it
carries on like this, it will be in the minus.”



De Beers sells the vast majority of its rough diamonds at 10
sights throughout the year in
Gaborone, Botswana. Sales for the May cycle include last week’s sight, as well
as rough auctions. Revenue from the miner’s first four sales are down 3% year
on year to $2.31 billion, according to Rapaport calculations.



Global consumer demand for diamond jewelry grew 2% to an
all-time high of $82 billion last year, fueled by a strong US consumer market
and a recovery in the luxury sector in greater China, De Beers reported last
week.