De Beers will expand its flexibility for this month’s sight as the miner responds to the market downturn by limiting supply rather than lowering prices.
The company will allow sightholders to remove certain goods from allocations of rough diamonds and request larger buybacks than usual, it told clients last week.
The July sight comes amid rising inventories and falling prices in the polished sector, especially in India. De Beers’ customers expect the company to maintain rough-price levels to avoid flooding the market and having a further negative impact on polished.
De Beers’ sales policies have been in the spotlight in recent crises because of the challenges manufacturers face deriving profits from the rough. The latest concessions apply to a broad range of sight goods but focus on items for which profitability has been especially tight, sources said.
De Beers’ system of contract sales, which rewards sightholders that buy their full allocations, has also received criticism for putting pressure on the midstream to accumulate unwanted inventories.
At the upcoming trading session, sightholders will be able to refuse up to half of lots in three boxes of medium- and higher-quality rough under 3 grainers (0.75 carats).
Customers with beneficiation factories — cutting units in diamond-producing countries, such as Botswana — can remove lots from an additional 21 boxes, the note said.
In addition, De Beers will allow sightholders to sell up to 30% of certain rough purchases by carat weight back to the miner without it affecting future allocations. This buyback concession — which is usually capped at 10% — will apply to 13 boxes as well as four categories of unaggregated goods from the miner’s Namibian operations.
Enhanced flexibility usually accompanies stable prices, as De Beers uses these mechanisms to limit sightholders’ losses without having to sell for less. Customers can choose to keep the most profitable items and leave the rest.
Rough-market insiders expect sales at the sight to be under US$200 million — down from US$315 million in June 2024 and US$411 million in July 2023 — as sightholders take advantage of the flexibility. July is traditionally a slower period for rough sales, with the market picking up in August as the industry prepares for the holiday season.
However, price reductions are necessary given the mismatch between rough and polished valuations, sightholders argued.
“They think flexibility is enough for months to come,” one market insider told Rapaport News on Monday. Many don’t think this is the answer.” -rapaport.com
