"Survival Economy" for De Beers' Sightholders

Market Analysis
19/06/2015 09:48

Industry analyst Edahn Golan ponders the plight of De Beers' sightholders against the following background: One-carat, HIJ/VS and FDH/VS1-SI1 round polished diamonds are mainstays of the diamond consumer market. Since June 2014, their price declined by more than 20%. However, prices of the rough boxes required to produce them - the Commercial 2.5-4 ct box and the Fine 2.5-4 ct box - were reduced only by 11%. The wider this gap grows, the more difficult it is for sightholders to squeeze out a margin by cost-cutting and marketing. So why do they keep coming back for more? It is a matter of survival: they are leveraged too much to liquidate, and have accepted that they have no other 'good' alternative. Thus, as one broker said, “They buy and cry – and that is exactly how De Beers wants it to be.”