De Beers Announces Price Hike

By Rob Bates, Senior Editor -- JCK Online, 3/1/2005 2:00:00 AM

De Beers announced a 3 percent price increase at its January sight, and sightholders said it will mostly affect bigger and better-quality stones.

Prices could jump as much as 5 percent on the highest-quality and most sought-after rough, they said. Smaller goods appear to have received a lesser increase.

De Beers spokeswoman Lynette Hori said the increase reflects supply and demand: "The first half of 2004 had shown good growth in retail sales of diamond jewelry across the consumer markets, with initial estimates of a 7 percent [gain]. In the third quarter, the overall world trend was up 3 to 4 percent in local currency value [5 percent in dollars]." She added that preliminary forecasts say diamond jewelry "outperformed the overall retail trend during Christmas."

But some sightholders disagreed, complaining privately—which is the only way sightholders will complain these days—that the increase was not related to market fundamentals, coming as it did after a mixed and sometimes disappointing holiday season.

Most pinned it on continuing speculation on sightboxes, with one sightholder noting, "If I were in their shoes, I'd do the same thing."

All hoped they could pass the increase down the line. "I'm certainly going to try," one said. "I'm not making tons of money these days."

More Changes at the DTC

At the January sight, the Diamond Trading Company announced yet more changes in the De Beers-sightholder relationship:

Sightholders will pay for what they now get for free. The most controversial proposal, it would include the costs of marketing generic diamonds and of managing the sight process. Spokeswoman Lynette Hori stresses that nothing is final, and she calls reports in the Israeli press that De Beers wanted a 2 percent surcharge on each sight "inaccurate."
Hori said the levy will "support DTC efforts to continuously deliver [its] services to the highest possible standards of professionalism and integrity ... [and] will have a positive effect upon market growth, industry efficiency, downstream transformation, and sightholder profitability.
A forensic accountancy team will audit client profiles on a random basis. Because the veracity of some sightholders' answers to the DTC's client profiles has been called into question (mostly by other sightholders), the accountancy team will also investigate profiles where "the DTC [has] reasonable grounds to question the data submitted in a profile application as inaccurate or untrue." It stressed that the information the team receives will be kept confidential.
The statement added that the mechanism will "also demonstrate to organizations policing anti-money-laundering legislation that we are doing all that is reasonable [to ensure] that both we, and our clients, are not breaching fundamental laws and/or industry guidelines."
Companies will no longer be eligible to become sightholders if they hold a "material interest" in a diamond-mining business.
The length of the current sightholder contracts, two years, will be stretched to two and a half.
Most sightholders were taken aback by the new requirements. Some were particularly alarmed at the request that they pay for generic diamond marketing, with some speculating that the DTC would eventually cease its 70-year-old tradition of generic advertising. (Hori denies this.)
"Everyone is pretty much numb right now," says one sightholder. "We keep asking, What's next? This could be much bigger than the 3 percent price increase."