IDEX online research rough report: premiums and price hikes

Rising demand and prices characterize the global rough diamond sector today. Demand for rough diamonds is driven by a steady demand for polished and some speculation, leading to premiums of 5-10 percent.The Diamond Trading Company (DTC) has increased the prices on many of the boxes in a larger than normal Sight, which is estimated at more than $650 million. The overall price increase is about 2-3 percent, however, some boxes saw their prices rise sharply.

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Among the boxes that have seen a price increase are the small makeable boxes Cubes -3 grs/+7, up 5.2 percent since the last Sight to $165.29 p/c and the MB Clivage 3 grs/+7 box, up 7.2 percent to $106.82 p/c.

In the Fine goods, the Collection Z 4-8 grs is listed at $1,135.27 p/c, up 6.7 percent. The increasing demand for the Fine 5-14.8 cts box may have driven up its price 10.4 percent to $5,991.76 p/c.

DTC also sharply increased the price of the sought after Crystals 5-14.8 cts, up 8.1 percent to $4,719.28 p/c.

While speculative buying is not at the wild rate seen in the past, the recent improvement in polished demand is causing manufacturers to expect a growing need for rough, and they are buying accordingly.

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“While speculative buying is not at the wild rate seen in the past, the recent improvement in polished demand is causing manufacturers to expect a growing need for rough, and they are buying accordingly.”

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One industry member points out the condensed structure of the industry to explain the willingness to pay a mid-single digit premium. A few companies have direct access to the majority of rough diamond supply from miners, having what is called in the market “a strong hand,” while many smaller manufacturers need to compete hard for the rest of the available goods.

The result is that when demand starts to pick up, a large number of manufacturers are going after a diminishing quantity of rough, and prices increase. Most of the increases are in the form of growing premiums. Traders paid premiums ranging from 5-10 percent this past week, with many boxes trading at a premium of 6-7 percent.

The hope among traders is, however, that the race after goods will not spiral out of control. Prices of rough sold by DTC and Alrosa are considered “fair,” meaning that a decent margin can be made.

Currently asking prices for polished diamonds are increasing, but buyers are resisting the price hikes. With expensive rough diamond stocks, manufacturers are concerned that further increases in the price of rough may lead to a deterioration of margins. This concern may cap rough diamond prices.

The large size of the Sight, estimated at more than $650 million, is not a result of higher demand, but because it was the last Sight of the ITO period. DTC wanted to meet its commitment to Sightholders and make up for some of the shortfalls created on the mining side.

The next Sight will have a new ITO and five additional Sightholders. They are joining as part of a program to give a Sight to companies that buy specific goods consistently from DTC’s sister company Diamdel.

Outlook

A wide range of reasons, including polished diamond sales and prices, anticipated demand, bank financing and more, drives demand for rough diamonds. In the short term, demand and prices are forecast to remain stable, especially because no large changes in demand are on the horizon.

Demand for key DTC boxes following april sight

Source Idexonline