Why is selection so poor right now?

[ChooChoo]

Hi all,

I am just wondering if the experts can explain why the selection is so low right now. I am finding barely any diamonds within my criteria, whereas a few months ago there were at least 10. Is this a seasonal thing? When does the selection pick up again?

 

[pqcollectibles]

Maybe the size and color???

There have been warnings for the last year of the lack of higher color rough in the pipeline. If I remember correctly, the warnings were for the 1.25 and 2 carat ranges.

Are you looking for a hugely popular carat size, like 3/4, just at 1 carat, or such?? Certain highly desireable carat weights turn over very quickly.

Just a couple of thoughts.

 

[pricescope]

From Rapaport news:

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Shortages for round 1.50ct+ and strong Hong Kong demand for H+, VS+, I-J colors creating sellers market for larger sizes.
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Full article: Weekly Market Comments 4/2/2004

 

[openhelix]

The prices of rough have also gone up considerably lately. Therefore, a lot of "stocking" dealers are sticking less. And, from what I've heard, siteholders are calling back in stones that were out on memo. I would expect the quantity to go back up in the next month or three, but also with the associated higher prices.

 

[luckyhonu]

I was wondering about this also, thanks for the info.

 

[niceice]

We've eluded to this occuring in several posts over the past few months, so you can't say that you weren't warned... The DeBeers Diamond Trading Company (DTC) is "stabilizing" the market - read increasing market prices forever and ever - an action which is being followed by their primary competitors. The DTC eliminated approximately half of the site holders authorized to purchase diamond rough from them in the last quarter of last year while simultaneously increasing the price of diamond rough and reducing the amount of diamond rough being released. Their competitors immediately published notices declaring that they were not seeking any new clients and matched the price increase. There was another price increase mid-February and once again, the amount of diamond rough released into the market was reduced. We've seen this tactic over and over again through the years and we've yet to see diamond prices decrease after this cycle. Our suppliers are complaining that they are having difficulty sourcing diamond rough, many of them are "dry" with little to offer - this doesn't exactly make it easy for somebody as precise as us to buy diamonds so we have less to offer... Those dealers who sell off "virtual lists" still have a fair amount to offer, but when they call for those diamonds they are finding that the dealers are not willing to negotiate and this is causing quite a problem for those dealers because many of them are advertisting fraudulent prices based upon an old premise that they would be able to shave off a few percentage points when they called for a stone based upon their volume - what a shock that must be to many of those dealers who are fairly new to the industry - needless to say, we're totally cracking

Those of us who purchase for inventory on a consistent basis throughout the year are the first to be offered new production, call it a payback for loyalty. As the market tightens, the cutters are beginning to recognize the importance of customers who buy for inventory as opposed to memo / borrow inventory in hopes of sales... We're not the only ones who purchase for inventory, you should also check out GoodOldGold, WhiteFlash, SuperbCert, DirtCheap, BlueNile and DiamondBrokersOfFlorida as we're the group of "buyers" that is likely to be able to find what you're looking for in a tight market because we're all tied into the inner circle when it comes to direct distribution from the cutters in tight times like these. If you think we're talking out of our "hats" take a look at the multiple listing service provided here on PS and you'll notice that fewer of the vendors are repeatedly listing the same diamonds as one another, this is because the cutters have begun to cut-off the ability for "virtual" dealers to list their inventory without buying it. This too, is in accordance with the announced intentions of the DTC who two years ago expressed their intentions to eliminate virtual dealers from the internet, why do you think we opened a store?!?! it's not like we needed to with our internet volume!

 

[CaptAubrey]

i don't think anyone in the industry really wants a price war between de beers and rio tinto, etc. the only people who would benefit from that are the consumers.




the situation is still in flux. apparently some of the big retailers like walmart are digging in their heels and refusing to pay the higher prices. manufacturers are really getting squeezed. a lot could happen over the next year or so, but i agree that we aren't likely to see any falling prices unless one of the producers breaks ranks and starts discounting their rough.

 

[Paul-Antwerp]

I think you should see this in an even broader context.

A few years ago, De Beer's went private, with the Oppenheimer family entering into huge debts in order to take the company off the stock exchange. At that time, the company was sitting on an enormous stock of rough diamonds.

Soon, they started the Supplier of Choice-strategy, which forced their customers to go more downstream and to invest more into selling and marketing at retail-level. The competition among sightholders (since they risked losing their position) caused them to buy more rough than they could chew. In this way, the stock of rough at De Beer's disappeared, and was replaced by another excess-stock of polished in retail markets, with the U.S. being the most important market.

During the last 15 months, De Beer's raised the price of rough by approximately 20%. Prices of polished have gone up slightly, but not at the same level as prices of rough.

It is clear however, that De Beer's does not have sufficient rough in high colours and clarities, so there you face a serious shortage. Also, there you can see that prices of polished in medium cut-quality has gone up the most. There, the difference in price-level between a medium cut and a superior cut has become very small, and this also reduces the supply of superior cuts.

All in all, if you compare the current situation with the situation of an excess supply of polished, you will definitely see a dramatic difference.

I can see it clearly in my own business. We are currently producing twice as much as last year. But since many customers buy stones while they are still in production or in GIA, we end up with a ready-to-sell-stock, which is only one third of the average stock-level of last year.

Live long,

Paul