“Supply-Demand Fundamentals Remain Strong”

Speaking at a Press Meet in Mumbai, Varda Shine, CEO, DTC, assured the gathering that despite the difficult last quarter of 2011 and the apparent overhang of inventory at the present moment, supply-demand fundamentals for the diamond industry remained strong, “with demand growing at a pace never seen before”.

“The last quarter of 2011 saw the market changing,” she commented. “There was an underhang of inventory at the end of 2010 which drove rapid growth in the first part of the year, but in the latter half, the market started dropping. In India this was mainly led by the fall of the rupee which added to the price of diamonds, and China was also down.”

Shine pointed out that it had been observed in the case of gold, that a rise in prices resulted in resistance for a brief while but then consumers came back to buy at the new prices. The case with diamonds was similar she said.

Shine went on to say that looking at the broader picture, however, the trajectory was towards growth, led by strong demand in China and India and a fairly good US market. “The US is doing well,” she observed. “It has surprised us all.” She remained optimistic for overall growth figures.

Noting that much has changed since she last met the press in Mumbai in 2011, Varda Shine, CEO, DTC, said enumerating the developments, “We have made changes to the distribution system and introduced dynamic distribution; the Oppenheimer family has decided to sell their stake in De Beers; there is a new CEO for De Beers, Philippe Mellier and there is a new CFO as well - Gareth Mostyn, who was earlier with Anglo American.” She added that it was significant too, that for the first time De Beers had signed a ten year contract with Botswana, and that DTC operations would be shifting there.

While she refused to speculate on the changes which might be introduced as a result of the sale, she affirmed that Cynthia Carroll, CEO of Anglo American had categorically stated that Anglo does not view diamonds as a commodity and understood that they were special.

In response to a question on the newly introduced “dynamic distribution” and whether there was not a dichotomy in cutting down on the number of sightholders in the initial allotment but being open to adding sightholders during the contract period, Shine explained that sightholders were chosen based on a system which included both an assessment of the rough available to De Beers and an assessment of the applicant’s submitted profile. “Whoever can best add value to the diamonds is chosen,” she said, also adding that if several people were demanding similar goods of which there was a shortage, naturally the top contenders only could be accommodated. She said that as a matter of routine, 10 per cent of the goods are kept aside for Diamdel while 90 per cent were allocated to sightholders. She clarified that this demarcation would not change even if companies were allocated sights later during the contract period. She also indicated that it was possible that this might work in reverse as well.

On a query whether sight pricing was based on auction prices of Diamdel, Shine said that the Diamdel auctions performed a triple function: they provided access to De Beers goods for non-sightholders as well as sightholders who may require particular goods which were not part of their box; it provided pricing information to the DTC; and also provided market information. “For our own pricing we take into consideration both the prices at which goods are sold and also look at what prices were offered generally,” she said.