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De Beers will Continue to Take a Cautious Approach in Terms of Production and Sales

17 august 2009

Rough&Polished decided to make a blitz probe into the rough market and asked the representatives of De Beers (diamond mining) and Hardstone Processing (diamond polishing) for short interviews, to which they kindly agreed and here is what they said.

David Prager, Director of Communications De Beers Group:

According to reports DTC's July sight had an estimated value of USD350 million, and is further expected to reach USD900 million. Is it true?

The DTC does not comment on the value of individual Sights.  What I can say however is that Q2 sales saw a considerable improvement over Q1 sales.  In fact, the average Sight in Q2 was more than double the average Sight in Q1.

What is your opinion on whether this would be enough to regulate the diamond market till the end of the year?

I’m sorry, I don’t understand what you mean by “regulate.”  De Beers has, and will continue, to mine diamonds in line with client demand.

Do you see any improvements on the diamond market at this moment?

The industry has been severely impacted by the global economic environment being the most difficult in decades. A result, in part, of De Beers’ decision to reduce production and sales in response to lower client demand, inventories of rough diamonds in the cutting centres have reduced by some 30 per cent from their peaks in 2008, and debt levels in the cutting centres have reduced to more sustainable levels. In Q2 De Beers has seen industry sentiment improve significantly, while the price of rough diamonds has begun to trend upward. These are translating into improving sales trends for the DTC.

At the retail level, demand remains subdued in the major US market. As the rate of decline in demand has slowed, however, the second half should see improvement. Demand from emerging markets, mainly China and India, remains positive.

De Beers will continue to take a cautious approach in terms of production, sales and cost management, while anticipating the continued steady recovery of the industry. Looking to the medium-term, diamonds have historically performed well in periods following recessions, with significant price growth seen in almost every recovery period dating back to before the 1970s. In the long-term, the fundamentals of the diamond industry remain strong. With no major new diamond discoveries in more than a decade, and with worldwide reserves at an all time low, diamonds will become more scarce. As demand grows in emerging markets it is likely that sales will outpace forecast diamond supply for many years to come.

Rough&Polished, London

Burhan Seber, CEO of Hardstone Processing

The DTC is only one supplier to the industry.  Alrosa’s plan to sell over 2 billion in H2 2009 will naturally impact the market, which had been till recently starved of supply. 

Q2 2009 witnessed increased appetite for rough diamonds, which was followed by recent price increases.  At this moment, the diamond industry seems to be on a ‘bullish’ run, like the stock market; so yes there is great improvement currently. 

However, this is not aligned with polished demand or polished price trends.  More importantly, it is not aligned with the state of the world economy. 

The recent upturn could be due to companies’ restocking following the inactivity during the crisis.  But given that demand and sales are still weak, how long can this continue? 

The greatest change that has occurred as a result of the crisis is that the industry has returned to a demand driven model that follows market forces. 

It would be wrong to assume that the major players could regulate a market that is at the mercy of the greater world economy, whose ‘green shoots’ are currently being questioned. 

Troubled waters may still be ahead… 

Thank you for your query.

Rough&Polished, Windhoek

Veronica Novoselova, Rough&Polished African Bureau editor in Namibia