WEB SITE № 6 DE BEERS: "I CARE ABOUT MY BUSINESS; YOU CARE ABOUT YOURSELF »
Site number 6 was initially estimated at $ 600- $ 650 million, judging by the intention to make an offer (ITO). Now it seems that ITO was even lower: $ 500 million plus another $ 50 million for goods sold at a special discounted price, probably because of the large number of deferred purchases.
In fact, the site was below half of this figure - $ 150- $ 200 million after sightholders had postponed their volumes and then refused most of the offer. Anyway, on the site in July the sightholders preferred not to buy out about 60% -70%.
Some sightholders took only one or two boxes from their entire volume on the site. Some have postponed part of their goods and have given up everything without buying anything at all. Some did not even bother to appear on the site. Companies that in the past hardly looked at the goods and took everything as they are, now abandoned the large volumes of the goods offered to them. This level of lack of interest in buying, probably never happened before.
Thus, it was a turning point for the industry. In March, sightholders declined about 30% of the site, and this was a rarity, bringing some sightholders a sense of satisfaction. This time, it's not that they feel how they changed the situation. As one sightholder said: "People listened to the advice of Philippe Melier [De Beers chief executive]:" I care about my business; You take care of your own. ""
In recent months, Melle spoke of this several times, and sightholders, an easily adaptable group of people (if any), clearly heard and understood him. This was a turning point, because sightholders, who for months declared that the offer they had offered was not economically viable and still continued to buy, decided to make an economically very profitable step and simply not buy something that does not meet their needs. It's about taking care of your business.
From the point of view of sightholders, the recent rejection of a large number of diamonds makes sense. If diamonds obtained from diamonds are not sold, or if their stocks are high and do not decline at a rate that justifies the purchase of additional diamonds, or if the price of diamonds does not allow them to make a profit, then the refusal makes sense. But what is good for diamond manufacturers is not so good for De Beers.
ABOVE BILLION DOLLARS ON LOST SALES
After the March site it was established that in the first quarter of this year, diamonds worth more than half a billion dollars, which remained in the hands of De Beers, were abandoned. The last site was abandoned by diamonds for an additional $ 300- $ 350 million.
For the first six months of 2015 (five sites), sales decreased by 5 million carats. In total, diamond sales decreased by 26% in volume to 14 million carats, and total sales fell 27% to 13.3 million carats, according to the parent company Anglo American.
In total, the decrease was 4.8 million carats. At an average cost of $ 206 per carat for the first five sites of this year, De Beers lost sales by about $ 1 billion. Add another $ 300- $ 350 million for diamonds, which were abandoned on site # 6, and this figure grows to $ 1.3 billion - a significant figure for the company, whose receipts in 2014 amounted to $ 7 billion and a lot of stocks in stock.
De Beers raised prices for some products on site No. 6 and reduced them to others. Some price changes made sense - to products of reduced demand, a change in the range, etc. - these are the usual price adjustments. But now the times are not ordinary. In general, De Beers continues to decline prices, but sometimes there are big questions. For example, the price of a pair of still low-profit boxes increased, leaving the sightholders no opportunity to profit.
One insider explained that the company is trying to keep its price index from slipping, so prices rise where possible. From a broader perspective, it seems that something more serious is needed. In 2009, at some time De Beers offered a wide range of mixed goods and sold it at one price. So it was difficult to see if there was actually a price reduction, which did not significantly affect the value of stocks. Now there is an intention, at least, a proposal that De Beers do the same in August.
Another proposal - a sharp decline in prices, is a step that establishes a correspondence between the price of diamonds and the price of diamonds and restores profitability for diamond producers. The conversation is about a price reduction of about 20 percent. In this scenario, everyone will pay a price - De Beers, sightholders and wholesalers - is a radical and painful measure, similar to an urgent surgical operation, in which the benefit of treatment outweighs the pain.
It is so cardinal that it can even lead to a chain of bankruptcies. In those quarters, when this idea was applied, it was not necessarily considered bad, but on the contrary. "Let it be so," said one man. It can be assumed that many would fully agree to say goodbye to companies that do not manage their stocks properly. This would also reduce competition.
Taking into account so many grievances and bitterness among sightholders, a large-scale reduction in prices is acceptable, and most of them want it. It is necessary to take into account that price reduction is not a goal, but a signal and means - a signal that demand has contracted and a means of returning profitability.
A WEAK RECEPTION IN THE DIAMOND-BRILLIANT INDUSTRY
In social networks, more talk about the recession in the diamond and diamond industry, mainly coming from India, the global diamond production center. Most of these conversations - on Twitter and Facebook - are about increasing workforce cuts, and - sadly - even about suicides.
Indian labor, especially people working in small independent enterprises, accepting orders, as well as small companies, pay a high price. The consequences are far-reaching. A family that loses a father is a huge tragedy, and this must be remembered.
PRODUCTION VOLUMES OF DE BEERS REFLECT TIME, PRICES REFLECT THEM IN A LITTLE DEGREE
Last week, Anglo American reported that diamond production by De Beers fell by 6% to 8 million carats in the second quarter, mainly due to a decrease in content and a decrease in the plant's workload at the Orapa mine. Production fell sharply at the tailings processing plants in the Venetia and Jwaneng mines in response to the softening of terms of trade, Anglo reports.
Production has actually declined in every country where De Beers has mines. In Botswana, production fell by 6%, in South Africa fell by 5%, in Namibia, production fell by 15%, and in Canada by 11%.
http://edahngolan.com/how-sightholders-take-care-of-business-a-market-report/?utm_source=Edahn+Golan+Diamond+Research+%26+Data+Newsletter&utm_campaign=966d40a0cf-RSS_feed_newsletter_campaign3_12_2015&utm_medium=email&utm_term=0_3db00ffc52-966d40a0cf-319355397
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