Sightholders agreed that the assortments on this site were smaller, if not much less. De Beers reduced its production, and although it has more reserves than usual, it may still lack certain goods. It is possible that the reduction of assortments is the result of a reduction in some types of products.
If the assortments have decreased, then the price reduction according to the price list may reflect a combination of a reduction in price and a decrease in the value of products. In this case, prices are not lower by 20% or even 13% and, probably, not by 9%. According to the estimates of a major diamond dealer, the real price reduction is 8%. Another insider said that the cost of the goods fell by 5%, and the real price reduction was about 4%. Thus, it seems that the real price reduction was about 7-8%.
The size of price reduction is a real economic issue. Many sightholders continue to state that prices are not low enough to make it prudent to cut and polish, especially in the light of current trends: manufacturers prefer to buy diamonds instead of producing diamonds from diamonds. The reason for this is that it is cheaper to buy diamonds on the market than buying diamonds and doing their cutting and polishing.
The chart below shows changes in prices for three popular boxes: Fine stones weighing 2.4-4 carats, Commercial 2.5-4 carats and Spotted Sawables 4-8 grains. Apparently, the prices for them have changed a little over the last year, and at the most the price reduction - more than half in all three cases - occurred on the latest website. Over the past two years, the price of the price list for these three products has decreased by 12%, 17% and 24%, respectively.
The site was planned for more than $ 200 million, and the remaining purchases included some goods that sightholders were asked to postpone, but changed their mind. In general, sightholders took only what they needed, and only a few boxes were taken for offer on the secondary market. The reason for this is that selling goods on the secondary market often leads to losses. Another reason is the concern that buyers will not pay - later or completely, that will hit cash flow. The goods sold were often sold with a 5 percent premium on a 120-day loan.
Finally, a very small unscheduled amount was requested, and hardly any special products were offered. One insider said that special diamonds were offered on the website of South Africa, but the goods were considered expensive. In total, canceled deferred volumes and unscheduled volumes are estimated at $ 50- $ 75 million.
De Beers is trying to play a positive role, according to the sightholders. The prices were reduced, the volume was reduced (again many boxes were not offered), and there was more flexibility in the offer. In addition, De Beers announced plans to conduct a diamond marketing campaign in addition to the holiday campaign "Brilliant is Forever", conducted by Forevermark.
Still, the sightholders' expectations are very small. Sightholders do not express any optimism about the near future, as they are concerned about numerous cases of default on the market and the persistence of uncertainty. They just do not see the relief from the sites.
POINT OF VIEW OF THE FINANCING PARTY
When the crisis in the diamond and diamond industry began to develop, it was felt that it was created by itself and is not connected with macroeconomic issues. Since then, the fall of Chinese stock markets and the general weakening of the Chinese economy are dragging the world economy back. Prices for such commodities as copper, iron ore and crude oil are falling for many weeks.
Does this have any negative impact on the financing of the diamond and diamond industry? "I do not think so," says Erik Jens, executive director of diamond and jewelery operations at ABN AMRO, a leading diamond financing organization. He actually sees the positive side: "This creates opportunities, leads to consolidation - for example, gives a chance for innovation."
Consolidation in the midstream (middle part of the diamond pipeline) can occur not through the acquisition of companies by each other, but rather due to the fact that some of them are closed, while others appear to fill the emptiness; This is a trend that we are already observing. In the last couple of months, several companies in India, Dubai, Thailand and Israel hastily closed.
When Jens was asked about the main long-term model of the diamond industry - supply reduction and demand growth - he replied that he does not believe that the current decline in China, for example, changes this model. "We will see a slowdown, but this is part of the normal [economic] cycle. Demand will continue to rise, "he says.
On the other hand, inside the industry, he still wants to see stricter control, saying that he "certainly" expects that such industry organizations as the World Diamond Council (WDC) and the World Federation of Diamond Exchanges (World Federation of Diamond Bourses, WFDB) will introduce more stringent controls, for example, the already existing Name & Shame policy (to publicize and shame).
He also expresses dissatisfaction with the high levels of borrowing, which constantly raises the question of the role played by Indian banks. "Indian and Chinese banks learn to understand that everything depends on the knowledge of the industry." He hopes that, after experiencing several failures, they will learn to "act more circumspectly, will learn from mistakes."
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