De Beers rough diamond sales continued to be very slow in August, as the company announced provisional revenues at the seventh sight of 2019 totalling $280 million. This is significantly lower (-44%) than the $503 million sold at Sight 7 2018, and represents a modest uptick from the $250 million sold at Sight 6, which was the lowest amount earned from a sale since December 2015. As with the previous sight, the miner gave its clients the opportunity to leave up to 50% of available goods on the table to lower the pressure on buyers without lowering their prices. As announced in an internal communiqué to sightholders, De Beers said it would also buy back up to 20% by carat weight of customers’ purchases instead of the typical 10%, specifying that they could not use both options (reject 50% and sell back 20%) on the same box of goods.
De Beers is offering several options to increase the flexibility for manufacturers and traders struggling with an oversupply of rough and polished: in addition to the higher level of buybacks - whereby customers purchase the diamonds and then sell them back to De Beers at an agreed price, while having those purchases count toward their 'demonstrated demand' which determines future allocations - De Beers also enabled buyers to make additional deferrals of goods to later sights, and set an earlier date on the annual opportunity for customers to reschedule their purchases. Bruce Cleaver, CEO, De Beers Group, said: “With midstream participants continuing to work down polished diamond inventory levels and reduced levels of manufacturing in the key cutting centres, De Beers Group provided customers with further supply flexibility during the seventh cycle of 2019.”
In this market, particularly with De Beers keeping prices stable, clients are trying to buy as little rough as possible as they wait for polished demand to pick up. They wish to avoid producing expensive rough and being stuck with goods that polished buyers don’t want. "The remedy at the moment is for rough producers to cut production and sales to reduce the surplus of goods in the pipeline," writes rough trader David Harari writes on BlueDax. "Of course, clients want cheap rough so they can make some profit in manufacturing or trading, but even that is not possible at the moment. When we asked Sightholders why they bought expensive rough for so long, the answer was that they had no choice. Turning down goods would have made them lose their bank credit and would have meant the end of their business ... Nothing has changed. The strong will survive and the time for making a profit will become shorter and shorter until someone comes up with a new system for the midstream."