Diamantaires in Antwerp and around the globe are assessing the potential impact on their operations of De Beers decision to open Diamdel auctions to more bidders and to expand opportunities to more companies to become Diamond Trading Company (DTC) sightholders.
“Obviously it will give us, as sightholders, an additional opportunity to buy the incremental goods we might need to service big orders, which is always important today,” said Roby Taché of Taché Diamonds. For De Beers, he said, “tenders are a way to better monitor the pulse of the market.” Previously, Diamdel auctions were open only to Diamdel clients, which numbered 468 at the end of 2009, and not to DTC sightholders, which currently total 79.
“I don’t think this is going to push prices up or affect the business for the companies that have been doing business with Diamdel for years in niche markets,” said Albert Haberkorn of A. Haberkorn & Sons. “This is just going to give additional opportunities to more people in the business to have access to Diamdel’s rough.”
Expanding on Experience
“Diamdel auctions have run successfully for two and a half years and we believe now is the opportune time to pilot extended participation,” explained Varda Shine, chief executive officer (CEO) of DTC. Diamdel, which launched its online auction platform in 2008, held 14 auctions in 2009, through which it sold 695 lots to 134 companies. “Diamdel has built world-class expertise in auctioning that can now be extended by way of a pilot to a wider pool of participating diamantaires,” she continued. “Diamdel has found that for its relatively smaller scale of operation, auctions have proved an effective tool for reaching more customers and have achieved better prices in some areas of goods.”
Shine sees potential benefits in the new system for current DTC sightholders, for current Diamdel customers and for companies that were not previously members of either group.
“For DTC sightholders, Diamdel’s pilot scheme will offer opportunities to purchase rough outside of their Intention to Offer (ITO),” Shine said, noting that these purchases would not impact sightholders’ ITO allocations. “The enhancements to the new Supplier of Choice (SoC) contract period and application process will offer sightholders a simpler and more efficient experience. Sightholders demonstrating demand will be offered the same amount in the subsequent ITO period, subject to availability.
“For Diamdel customers,” Shine pointed out, “the evolution of our distribution system will offer opportunities to be invited to submit a Contract Proposal Questionnaire (CPQ) at yearly stages during the 2012 to 2015 SoC contract period, subject again to availability. We anticipate that the amount that Diamdel auctions during the pilot is going to be broadly in line with the amount DTC currently makes available to Diamdel.
“Remember, though, that Diamdel auctions represent only a small proportion of De Beers Group’s availability of rough diamonds,” Shine cautioned. “Finally, I would add that the continued need for De Beers to optimize distribution efficiencies and manage its commercial risk as the world gradually recovers from recession, combined with our experience gained in auctioning, provides the perfect opportunity to introduce greater dynamism in our supply arrangements.”
The Details
As for the specifics of the changes, Shine said the pilot will launch in October 2010 and run until March 2011. “If that pilot is successful, and based on stakeholder feedback, the program will be extended from April 2011 to March 2012 to include other qualifying diamantaires. It’s important to say, though, that the ITO system remains at the heart of our distribution strategy and the pilot will not impact ITO applications from our DTC sightholders. “
Shine said the second major change was the streamlining of the SoC application process. “It’s going to be much simpler, quicker and effective for all concerned,” she said. Among other things, applicants can submit just one CPQ to cover multiple categories of goods.
The third change is the expansion of opportunities for diamantaires to compete for an ITO during the 2012-2015 SoC contract period. Invitations to submit a CPQ will be based on demonstrating consistently strong demand for certain categories of rough at auctions. They will, of course, be subject to availability and to applicants meeting mandatory sightholder eligibility criteria. Shine said “the opportunity to compete for an ITO at this stage will be open equally to sightholders and nonsightholders participating strongly at the auctions.”
For some Antwerp diamantaires, the DTC and Diamdel changes reinforce the need for them to organize themselves into a single purchasing cooperative that could command a bigger purchasing budget and create more opportunities to find the right outlets for every quality of rough. This larger purchasing power would help assure the Antwerp industry of access to rough, a special concern during times such as these, when supplies are short. “The people of Antwerp must unite and create buying groups if they want to be able to compete with the groups that are being set up elsewhere,” said Sashin Choksi of Swati Gems.
The Marketplace
In polished:
• Demand is weak for 30-pointers to 90-pointers in G+, VS1+.
• Very-low-quality piqués are in strong demand.
• So-called Chinese/Indian goods — G-K, IF-VS1 — are in demand.
In rough:
• Buyers are showing some resistance to high prices, which was confirmed at the Hong Kong show.
• Polished can’t follow rough increases because it would require too much of an increase so expectations are that rough could drop by 3 percent to 4 percent after the Diwali Festival.
Article from the Rapaport Magazine - October 2010. To subscribe click here.