With the box deferrals from last month being taken up in December, the Sight is estimated to be around $630m. Although this is a relatively large level for December one also has to take into account the fact that many Sightholders based in Southern Africa took up the option to defer up to 50% of their Sights until January 2015.
Both box presentations and prices remained pretty much unchanged on last month and the mood amongst Sightholders was probably at its lowest point so far this year.
From the De Beers perspective the data they have still indicates that the sales seasons in US, and China will deliver growth on last year of around 4% and 7% respectively at a retail level, and that buying patterns within the retail sector during 2014 still point strongly towards the requirement to restock in Q1 of 2015, and a strengthening polished market. While there is no firm evidence to dispute this data; from the Sightholders viewpoint the prolonged lack of profitability throughout the mid-stream, the continued slow demand and softening of polished prices, growing polished stocks all of which is underpinned by a critical lack of liquidity in the industry, make it difficult for them to share the optimism.
As a result rough boxes on the secondary market are virtually all available below list prices, and in many cases Sightholders were left with little choice but to refuse their boxes at the Sight. We estimate that between 20-25% of the Sight was rejected.
The market is clearly very confused as to how the situation will play out, but all agree that the current situation is untenable and something will have to change in the next couple of months. The overall belief is that even if polished demand picks up in Q1 as predicted, polished prices are unlikely to see the growth that is required to return the manufacturing sector to profitability and that a correction in rough prices at some point will be inevitable.
Mike Aggett, Managing Director
