Big Rough Price Cuts 'Will Result In Billion-Dollar Losses'

Market Analysis
26/11/2015 08:49

Rough diamond prices are undoubtedly much too high and manufacturers are struggling to sell polished as buyers are unwilling to pay, writes Vinod Kuriyan. This is mainly due to diamond miners being concerned only with their bottom lines and has weakened and destabilized the diamond production pipeline. But calls for an immediate reduction of 30 and 50 percent in rough prices is "a hasty, unthought-out and counterproductive step. It will immediately result in huge losses for the diamond processing industry running into the billions of dollars.

"Instead of seeking a drastic price reduction, the industry has to work collectively to first clearing the production pipeline of this high-priced stock. The most practical way is to first drastically reduce supply and in effect starve the pipeline until it clears. Combining this with a moderate price reduction will help the industry get its inventory moving by mixing higher priced goods with slightly cheaper ones and averaging out a cost that is acceptable to polished buyers." The comments come in response to a call from Martin Rapaport on Tuesday for the resignation of De Beers CEO Philippe Mellier and for the miner to slash rough prices and production.