diamond rough shortage, real or greed?
- Thread starter strmrdr
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glitterata
Ideal_Rock
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Very interesting poll.
Has anyone read "The Wisdom of Crowds"? Make sure you vote before you check the answers.
Has anyone read "The Wisdom of Crowds"? Make sure you vote before you check the answers.
"Of course, when the economy is under the political and media control of gigantic corporations (Debeers) unfettered by most forms of answerability and balancing-feedback dynamics (Free Markets), this allows a runaway reinforcing-feedback dynamic in which the self-interest of those non-organic entities (Debeers) can ignore the common good and progressively empower itself until it has completely destroyed the commons (Free Market). So part of the redesign of the markets includes a redesign of the character and role of corporations".
finerthings
Shiny_Rock
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Now that's a mouthful!
niceice
Brilliant_Rock
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The DTC is only about 60% of the equation at the moment... We've been told by our suppliers that we should expect to pay "well above Rapaport list" for the diamonds be purchase for inventory by the end of the year. Prices are definitely escalating, we're paying more for diamonds than we were selling them for a year ago and there is no relief in sight -or- should we spell that "site" - that would be a bad pun on "site sale" for those of you who think we've forgotten how to spell
Answer to the next question: What is a site sale?
Answer to the next question: What is a site sale?
Nicrez
Ideal_Rock
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Well, considering that 60% of the rough prices shoot up, then what's to stop the other "competitors" (Canadians, Russians,other independants) of DeBeers to want in on the price hike too? Considering all they would have to do is increase prices enough to increase profit, but low enough to gain a comparative advantage over their "comeptitor" (DeBeers)...
Debeers increases prices on 2ct or over...the well-to-do market gets hit with an increase...demand remains solid in the commercial goods category (as the lower income markets STILL feel a diamond's mystique is within their reach) and the "well-to-do" sector is hit up for more money than before due to an inflated price hike, created by a limited supply at site sales, all so that the higher priced goods can get higher and ALL the suppliers make more money, which gets incrementally higher from Mine, to dealer, to market retailer....
Just buy diamonds under 2cts. Less demand, less manipulation perhaps...
Debeers increases prices on 2ct or over...the well-to-do market gets hit with an increase...demand remains solid in the commercial goods category (as the lower income markets STILL feel a diamond's mystique is within their reach) and the "well-to-do" sector is hit up for more money than before due to an inflated price hike, created by a limited supply at site sales, all so that the higher priced goods can get higher and ALL the suppliers make more money, which gets incrementally higher from Mine, to dealer, to market retailer....
Just buy diamonds under 2cts. Less demand, less manipulation perhaps...
CaptAubrey
Brilliant_Rock
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On 6/11/2004 3:43:40 PM niceice wrote:
should we spell that 'site' - that would be a bad pun on 'site sale' for those of you who think we've forgotten how to spell
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except that it's also spelled "sight." de beer's clients are sightholders, not siteholders.
http://www.professionaljeweler.com/archives/news/2004/011304story.html
http://www.diamonds.net/news/newsitem.asp?num=4342
niceice
Brilliant_Rock
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What we are saying (above) is that the DTC is only 60% of the equation when it comes to the price hike, the other suppliers that make up the remaining 40% elected to raise their prices in accordance with the DTC increase.
You're right Captain Aubrey, it is spelled "sight" - we need to get some sleep. Just got in from the JCK Show in Vegas late last night and should have taken today off
Nicrez
Ideal_Rock
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Agreed Robin/Todd...why not follow the leader when profits are concerned...?
Sightholders are called such, because of the "Sight" meetings where the DTC basically gives you packages as they see fit, and also according to your "agent's" negotiating...
Ironic that these agents working on your behalf are connected to DeBeers either directly or indirectly...
So, the buyers basically buy these "boxes" sight-unseen, until they are given the box to examine at the actual sight.
Good luck arguing with the DTC or their "agents", sometimes you take the good you take the bad, you take them both and there you have...the Facts of Diamonds...
Sightholders are called such, because of the "Sight" meetings where the DTC basically gives you packages as they see fit, and also according to your "agent's" negotiating...
Ironic that these agents working on your behalf are connected to DeBeers either directly or indirectly...
So, the buyers basically buy these "boxes" sight-unseen, until they are given the box to examine at the actual sight.
Good luck arguing with the DTC or their "agents", sometimes you take the good you take the bad, you take them both and there you have...the Facts of Diamonds...
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You know that this looks weird. We Europeans tend to look at Americans as pro-business. But when De Beers' is concerned, I see so much left-wing, socialist-like ranting, that you all seem very European to me.
Now, I do not wish to start anything political here, I just think it is funny.
On the other hand, while De Beers' is not my most favourite company, I have to say that they should not be blamed for anything that is not their fault.
Of course, they (and most other producers) have raised their prices of rough. Well, they should. On the one hand, they are faced with less output from their mines and their purchasing-contracts. Furthermore, they have little to none new mines in development, and the worldwide mine-prospecting should yield about 4 new Ekati-mines in the next year, in order to meet the demand of 2008.
On the other hand, there is fierce competition between cutters for this rough. In the cases where rough is offered in tenders (where the producer does not set the price), one can see rough being sold for a price, which is the double of a reasonable price, based upon the value of the resulting polished. At this point in time, big diamond cutting companies are taking losses in order to gain market-share (both in buying rough as in selling polished). On the rough-side, we are clearly in a sellers-market.
I do not know in how far the situation is the same in polished. For sure, there is a tendency for prices to go up, but I do not know whether the procentual change will reach that of the price-rise of rough. This is a fight for market-share, and it could well translate in temporarily paying more for rough, and making no profit when selling polished. In the end, the companies which are not financially strong, will yield, and then the situation could become more normal.
All in all, I am happy not to be involved in this fight between sharks. As a small fish, I see these big guys being concentrated on their fight, while I try to get hold of every small bite that falls off their table.
I hope that this was clear.
Live long,
Now, I do not wish to start anything political here, I just think it is funny.
On the other hand, while De Beers' is not my most favourite company, I have to say that they should not be blamed for anything that is not their fault.
Of course, they (and most other producers) have raised their prices of rough. Well, they should. On the one hand, they are faced with less output from their mines and their purchasing-contracts. Furthermore, they have little to none new mines in development, and the worldwide mine-prospecting should yield about 4 new Ekati-mines in the next year, in order to meet the demand of 2008.
On the other hand, there is fierce competition between cutters for this rough. In the cases where rough is offered in tenders (where the producer does not set the price), one can see rough being sold for a price, which is the double of a reasonable price, based upon the value of the resulting polished. At this point in time, big diamond cutting companies are taking losses in order to gain market-share (both in buying rough as in selling polished). On the rough-side, we are clearly in a sellers-market.
I do not know in how far the situation is the same in polished. For sure, there is a tendency for prices to go up, but I do not know whether the procentual change will reach that of the price-rise of rough. This is a fight for market-share, and it could well translate in temporarily paying more for rough, and making no profit when selling polished. In the end, the companies which are not financially strong, will yield, and then the situation could become more normal.
All in all, I am happy not to be involved in this fight between sharks. As a small fish, I see these big guys being concentrated on their fight, while I try to get hold of every small bite that falls off their table.
I hope that this was clear.
Live long,
strmrdr
Super_Ideal_Rock
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Paul,
America is a house divided and right now it is close to a 25/25 split.
With the other 50 percent either think both sides are scum or just don’t care.
Most Americans don’t care about big business beyond what affects them and their jobs.
Microsoft got off because the government could not convince the people that MS was a danger to their paychecks.
In the same way most don’t really care much about DeBeers either.
Most Americans just want a chance to earn a good living, have a few toys and the time to enjoy them but most of all to be left alone.
........
Thank you for the very good summery of what you see happening from your prospective as usual it was interesting and informative.
America is a house divided and right now it is close to a 25/25 split.
With the other 50 percent either think both sides are scum or just don’t care.
Most Americans don’t care about big business beyond what affects them and their jobs.
Microsoft got off because the government could not convince the people that MS was a danger to their paychecks.
In the same way most don’t really care much about DeBeers either.
Most Americans just want a chance to earn a good living, have a few toys and the time to enjoy them but most of all to be left alone.
........
Thank you for the very good summery of what you see happening from your prospective as usual it was interesting and informative.
mdx
Brilliant_Rock
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I think you guys are been a bit optimistic thinking that De Beers (The Company) only control 60% of the rough market. Production figures from their mines may indicate this but I think their control goes beyond production.
De Beers is and has always been a net buyer of all available rough diamonds. This arrangement establishes a base price and provides funding to smaller operators.
Traditionally producers not contracted to De Beers would target a price higher than the De Beers buying price and marginally cheaper than the secondary (non sight holder) selling price. As Paul mentioned this is often done by placing the goods on tender.
Now with the new Supplier of Choice program the secondary market (Rough Dealers) have little or no supply as the bulk of the sight holders are large or specialized producers not dealers.
The secondary markets that supplies the hundreds of medium to small cutting factories must now source material from the tenders or take their chances with Diamdel (De Beers subsidiary) This situation then lifts the price of non De Beers material to the same level.
So who still totally controls rough and who will control the price polished.
Just a though
Johan
De Beers is and has always been a net buyer of all available rough diamonds. This arrangement establishes a base price and provides funding to smaller operators.
Traditionally producers not contracted to De Beers would target a price higher than the De Beers buying price and marginally cheaper than the secondary (non sight holder) selling price. As Paul mentioned this is often done by placing the goods on tender.
Now with the new Supplier of Choice program the secondary market (Rough Dealers) have little or no supply as the bulk of the sight holders are large or specialized producers not dealers.
The secondary markets that supplies the hundreds of medium to small cutting factories must now source material from the tenders or take their chances with Diamdel (De Beers subsidiary) This situation then lifts the price of non De Beers material to the same level.
So who still totally controls rough and who will control the price polished.
Just a though
Johan
wanderlost
Shiny_Rock
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I have to agree that the socialist/communist comment may be more of Americans rejecting what they see as a 'clear view' of capitalism in a non-free market. The words "cut throat" and ........ I dunno... can't think of anything else funny right now (too early
).
Anyway, I would like to comment that:
"On the other hand, there is fierce competition between cutters for this rough. In the cases where rough is offered in tenders (where the producer does not set the price), one can see rough being sold for a price, which is the double of a reasonable price, based upon the value of the resulting polished. At this point in time, big diamond cutting companies are taking losses in order to gain market-share (both in buying rough as in selling polished). On the rough-side, we are clearly in a sellers-market. "
Could this actually be in the best interest of consumers.... in a way? If the cost of cutters goes up (and assuming that they will pass on this cost to the retailer & the consumer).... and also assuming that they will accept less stones in this period to minimize their risk (of the market returning to 'normal')... would this not favor a trend to taking more time (though again this cost would be passed on) on the rough that they do take in & cutting better proportioned (H&A, low HCA, etc.) stones (that would be more liquid in a consumer market that offers only the choices of 'inflated expensive' vs. 'inflated more expensive (but nicer looking)' - I realize this is a bit basic, optimistic & poorly worded, but I believe I've gotten my point across.....
Anyway, I would like to comment that:
"On the other hand, there is fierce competition between cutters for this rough. In the cases where rough is offered in tenders (where the producer does not set the price), one can see rough being sold for a price, which is the double of a reasonable price, based upon the value of the resulting polished. At this point in time, big diamond cutting companies are taking losses in order to gain market-share (both in buying rough as in selling polished). On the rough-side, we are clearly in a sellers-market. "
Could this actually be in the best interest of consumers.... in a way? If the cost of cutters goes up (and assuming that they will pass on this cost to the retailer & the consumer).... and also assuming that they will accept less stones in this period to minimize their risk (of the market returning to 'normal')... would this not favor a trend to taking more time (though again this cost would be passed on) on the rough that they do take in & cutting better proportioned (H&A, low HCA, etc.) stones (that would be more liquid in a consumer market that offers only the choices of 'inflated expensive' vs. 'inflated more expensive (but nicer looking)' - I realize this is a bit basic, optimistic & poorly worded, but I believe I've gotten my point across.....
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DeBeers spends millions to support the marketing effort that gives value and appeal to diamonds. They want to maximize profits yet are willing to spend a great deal in order to obtain profits. This is a gigantic balancing act and has been highly successul over a long historical period. Over certain shorter periods the marketing has been not so well received or extremely well received, but in the overall, the long haul, no one could fault the package or the results.
Prices on diamonds, as set by DeBeers, are their measure of market value and the willingness of consumers to buy at given price levels. No one knows the market better and DeBeers exercises this knowledge in setting prices for rough. The market is very free to respond in a positive or negative manner.
What is apparent is that DeBeers has a very good idea of how to work the market and to set price points which become acceptable. Other players, not wishing to sell their merchandise for a lot less, follow the lead from DeBeers. Every seller needs to make sure of the profit margin so why not follow the acknowledged market leader? Why undercut the price and cut your own bottom line? This is what makes DeBeers appear to control the market, when, in fact, they investigate thoroughly and actually do a fine job of going with the flow (albeit at a maximized profit level).
It isn't really "Control", but it is truly knowing the market and the product better than any other major player.
Look at the colored stone market, if you want to see rare items being sold for irregular prices. No entity has the smartness or power to give it any power close to the diamond business. It may deserve it, but it doesn't exist. I'd much prefer to be a diamond player than a colored stone player. Most others in our business would also admit to the confusion which reigns in colored stones. If a DeBeers worked the colored gem markets we would have many more opportunities than we do today....At least, I think so.
Prices on diamonds, as set by DeBeers, are their measure of market value and the willingness of consumers to buy at given price levels. No one knows the market better and DeBeers exercises this knowledge in setting prices for rough. The market is very free to respond in a positive or negative manner.
What is apparent is that DeBeers has a very good idea of how to work the market and to set price points which become acceptable. Other players, not wishing to sell their merchandise for a lot less, follow the lead from DeBeers. Every seller needs to make sure of the profit margin so why not follow the acknowledged market leader? Why undercut the price and cut your own bottom line? This is what makes DeBeers appear to control the market, when, in fact, they investigate thoroughly and actually do a fine job of going with the flow (albeit at a maximized profit level).
It isn't really "Control", but it is truly knowing the market and the product better than any other major player.
Look at the colored stone market, if you want to see rare items being sold for irregular prices. No entity has the smartness or power to give it any power close to the diamond business. It may deserve it, but it doesn't exist. I'd much prefer to be a diamond player than a colored stone player. Most others in our business would also admit to the confusion which reigns in colored stones. If a DeBeers worked the colored gem markets we would have many more opportunities than we do today....At least, I think so.
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