De Beers Announces Pilot Fixed-Price Diamond Contracts

Rough Market
19/01/2017 10:50

De Beers announced they intend to pilot a fixed-price forward contract, which gives Auction Sales customers an opportunity to guarantee access to future supply, knowing ahead of time what they are expected to pay when the contract reaches maturity. The program will first be implemented on 16 February 2017, for the Grainers, otherwise known as Smalls- and Near-Gem categories of rough diamonds.

The program was developed back in December 2013 in response to customer feedback on Auction Sales’ similar contracts, where customers were guaranteed future supply however with a ‘floating’ price based on the price at the point when the forward contract matured. Small- and mid- sized Indian cutting companies were hit hard by the monetary reforms and these fixed-price contracts serve as an effective supply sourcing option for small and medium sized enterprises which are seeking access to regular rough diamond supply at a predictable price. “Demonetization is likely to have an impact on several of our businesses so we need to respond in the right way,” De Beers CEO Bruce Cleaver told sightholders this week. “It’s likely we will continue to experience the impact in the Indian industry in the coming months.”

As per the request of customers seeking to secure short-term supply contracts, Executive VP of Auction Sales, Neil Venur said: “we are therefore piloting three-month forward contracts on a fixed-price basis to complement our spot sales channel and the term supply contracts offered by Global Sightholder Sales.” Since the launch in December 2013, Auction Sales has sold more than 350 forward sales contracts.