When I read about ‘bumper years’ I always get a bit nervous unless the pronouncement takes place on the 31st December and refers to the previous twelve months and is not some Delphic pronouncement looking into the future.
But anyway, last week I read about De Beers predicting 2015 as going to prove to be a ‘bumper year’ for diamonds.
I suppose that the first thing I have to do is to define the word ‘bumper’, which my good mate the Concise Oxford English Dictionary quotes as ‘an unusually large or fine example’.
The tittle-tattle that I have been getting from this week’s De Beers sight in Botswana has been less than encouraging.
I have been told, for what it is worth, that there was an attempt by the sightholders to get together and to all refuse the Sight. So the story goes, De Beers managed with a few well placed telephone calls to prick this bubble with gentle reminders as to what impact it might have on future supplies to individual firms.
True or not, what cannot be disputed is that the mood at the sight was sepulchral, making the last few months of 2008 joyous in comparison.
The level of rejections from a sight said to be about $750 million was I told somewhere around 30%.
While this wake was going on so was the Basel Fair.
Again, all I can do is report what I have been told by more than one source that you could use many words to describe the Fair but neither success or ‘bumper’ were one of them.
Indeed, one rather charming description was that it was ‘very quiet’, but there was still a day to go, so at least there would be time to hold the wake.
We all know that over the past six months there has been a dramatic, at least 40%, drop in Indian manufacturing.
The markets in China and India have most definitely ‘cooled’, to use a polite term.
The world economy, despite America doing well though the latest figures do provide a dampener, is hardly booming.
The sudden and dramatic rise in the dollar cannot be helping other consumer markets, whatever local difficulties they might otherwise be suffering, such as the anti bling campaign in China.
Liquidity has been and is still a major if not all consuming issue.
The insouciance with which De Beers treated this subject in their annual results presentations is seriously coming back to haunt them.
Prices for what small amounts of polished which have been sold, despite the dramatic cut back in production, have weakened and in some areas quite dramatically.
Whilst De Beers and other producers seem to think that there is room for more price increases it would appear that the Russians have lowered prices.
Maybe something dramatic will pull the situation out of the fire, but I simply do not comprehend how any producer cannot recognise the gravity of the situation.
De Beers seems to be under the illusion that its clients have a licence to print money as one of the chosen; that was certainly true in the past but equally certainly has not been the case for the last eighteen months at least.
Whilst producers have been coming out with record figures their customers have been fighting to stay afloat, the bloated margins of yesteryear have long gone.
To argue that if their customers continue to buy they have every right to continue to sell is somewhat weakened when firstly this comes from a producer who we believe controls about 40% of the market and who appears to be able to dissuade any rebellious behaviour with a few phone calls.
As I have suggested before one of the curious anomalies about De Beers is that in some ways its monopoly has strengthened as its market share has decreased.
Last years success for De Beers whilst the rest of Anglo American suffered must add huge pressure to continue and even improve upon that success, but to do so recklessly truly risks a bumper year in terms of hastening an unusually large catastrophe.
