Price Increases are Coming

[WinkHPD]

In my conversations with people in the trade, especially in the diamond cutting part of the trade I am assured that there are some massive price increases coming. Although they are not yet showing in the Rap sheet they will be in the near future.

Paul Antwerp tells me that it is getting brutal in Antwerp with stones costing more than many of you are currently used to paying, and I am hearing the same thing from a lot of places, especially in the larger stones. Evidently some of the dealers are pulling their larger stones until prices for existing goods catch up to what they are now costing on the list. There is even one trade newsletter that is asking why Rap is not showing the pricing that is in the marketplace.

What this means for you as consumers is yet to be seen, but my guess is that for a while there may be some bargains for people who buy from vendors who do not stay current with the market and raise the selling prices when the acquisition prices go up. For reasons discussed below this applies only to vendors who own their stones.

This will mean a LOT of stones will not be available from the drop shippers, as when they call to get a stone on memo it will now cost more than what they have it listed for on their sites. Then those trying to buy the stones will get the dreaded. "This stone is not in house right now," message.

If you are looking for larger stones, especially those larger than 1.5cts, now is a good time not to be wasting. Do not wait for Christmas, and assume that they will by then be plentiful. These are very interesting times in the diamond trade, and I am curious to see what shakes out in the next couple of years as the DeBeers'' Supplier of Choice Initiative goes into effect.

Wink

 

[innerkitten]

Thats really interesting. What or who do you think is causing this increase. I mean there isn't the same kind of short supply of diamonds as there is for something like rubies and emeralds right.

 

[victorianblue]

Nothing like reading about a little game of International and Corporate greed to start the fouth of July off with a big bang.

 

[Lynn B]

Wink, thanks for the info. Very interesting.

I am so happy that I already got my diamond... wow, that's a first for me... beating a price increase. I am usually the DAY-LATE-and-A-DOLLAR-SHORT kind of a girl!

Lynn

 

[strmrdr]

Dont worry there will be plenty of cheap diamonds on the secondary market as the economy gets worse and it will get worse.

 

[baltneu]

I am not sure if the diamond industry is reading the newspapers and looking at world economic reports, but with large price increases, already a few this year, I wonder if buyers will gravitate to smaller stones rather than pay larger prices?
The industry does not seem to be driven by supply and demand, correct me if I am wrong, but prices dictated by a few. Perhaps the price of diamonds will go the way of oil prices in the world, with lots of bad feelings.

 

[Garry H (Cut Nut)]

In the late 90's De Beers had $5B in the safe and had to hold back Asian goods (very high clarity very low color) to protect a colapse after 1997 till early 2000.
They privitised and needed to liquidate the stock holding to buy out the public share holders during a difficult post tech bubble and Asian collapse.

Things are now better for trinket floggers than at any time globally in the past 5 years. Asia is on fire, Russian and eastern European rich are filthy rich. USA has recovered.

Now De Beers has no buffer stock - what comes out of the ground is virtually presold.
De Beers, Alrosa, RioTinto and BHP Billiton indivdually make up more than 85% of supply. They are all doing their best to get full value for their shareholders. Biz is Biz.

 

[innerkitten]

strmrdr , can the economy get any worse.....sigh

 

[strmrdr]

----------------
On 7/5/2004 1:34:12 PM innerkitten wrote:

strmrdr , can the economy get any worse.....sigh----------------

Yes and it will...

The stock market is heading towards another major currection soon.
There is more money than value in it still.
There are still way to many overvalued companies with virtualy nothing to support that price.

Real unemployment is around 15% in a lot of the country. Remember that the unemployment numbers dont count those that the benifits ran out for.
Homelessness is up and the shelters are seeing a lot more families.
During the good times its just the cronic homeless the shelters see but the numbers of new homeless are way up.

Underemployment is rampant I know people that a couple years ago were making 35k-40k at jobs they had 15 years that now are flipping burgers at $6.00 an hour.

High tech jobs are going overseas at a huge rate.

Every one is borrowed to the hilt and baried in dept including the US goverment.
US dollar is way down in value.
Right now we are bleeding money to other countries all over the place, aid, goods, services , dept payments and jobs.
Every one of those dollars comes from the standard of living for americans and there is getting to be less and less to go around.

 

[DiamondExpert]

Garry makes a major point - world surplus has in fact diminished dramatically, AND current supply levels are also level to decreasing with older mines being depleted and not enough new discovery/development to cope with current/future demand.

Also as Wink points out, there is likely to be a rapid upswing in diamond prices over the next year and beyond, a fact that currently seems to be masked in part by the fact that Rapaport is seriously behind the curve in reflecting the reality of recent rough price increases.

In the longer term (several years) I believe that the wholesale markets will increasingly demand that memo stones be less available and cash will be KING...so it will be the buyers, not the borrowers, of diamonds who remain in business.

What does this mean specifically for internet diamond sellers with only "virtual" inventories??...my guess is, and this is my personal opinion, they will begin to disappear if they don't start buying inventory because the stones will become increasingly "unavailable". The result will be fewer internet vendors (those who can't afford to purchase inventory, or can't form preferred purchasing relationships with wholesalers), AND for those who remain, somewhat increased average prices to the public because of larger profit margins to cover the increased cost of doing business...they won't swing back to anywhere near pre-internet margin levels, but will also not be down at the levels currently seen in these "virtual" inventories.

Oh yes, times are a changin'...

 

[Paul-Antwerp]

So many factors are at the basis of the current and future price increase.

- To maintain current supply of rough, about 4 new Ekati-mines need to be discovered this year.
- Many rough-producing countries are establishing systems to promote the local cutting, and thus the availability of rough in the traditional markets goes down.
- The strong South African currency, and future increased export taxes, will make most of the South African mines unprofitable at current prices.
- The big cutting houses are fighting for long-term-market-share in the diamond market, and the short-term-fight is to get hold of the best rough supplies, thus bringing current rough prices to unbearably high levels.
- The worldwide demand for diamonds has increased seriously during the last years, and excess stocks of polished have almost disappeared.
- With no excess stock of polished, the memo-business is slowly disappearing, and as dealers have to invest more in their own stock, they will have to increase their margins to cover their investment-cost.

I am forgetting some causes, and some others take too much time to explain.

Also, there probably now is some exaggeration in the Antwerp-market, and maybe things will cool down here. But this does not mean that prices will go down, it means that they might not go up as much as they have gone up here.

Live long,

 

[baltneu]

These are all good points.

I remember Economics 101 something called "Elasticity of Demand", meaning that as the price on an items goes up we tend not to want or demand it as much, and find alternatives that we can live with. Of course, you can argue that some items are inelastic, meaning that no matter what the price goes to, the demand will be constant. Such an example was milk, because we need to give our children milk for their health. (this is just an example, perhaps one can argue the example).

I wonder what is the case for diamonds. If right now for example a 1 carat RB is $5,000 retail, (remember just an example), what happpens to demand when the price goes to $7,500 and then $10,000 for the same 1 carat RB stone? Either we stop buying diamonds of 1 carat, and demand smaller stones or do we just stop buying diamonds and let DeBeers and the others eat them? No sure, because the price of a diamond is really artificially set (does not follow the rules of supply and demand). I am still amazed that the demand for diamonds is so high right now, with the world economy as such.

 

[WinkHPD]

You must remember that although the economy is tough for many, those that are making money are making a LOT of money. Demand, as has been stated by Gary is VERY high for diamonds right now, and with China coming into the market as a consumer it is likely to get higher in the near future.

Wink