De Beers has just dropped its rough diamond prices by 10% to 15%. Lots of people don’t know what’s going on. Here’s the story.
Over this past year, polished diamond prices have fallen by about 15% to 20% because China crashed, and synthetics replaced about 50% of US natural diamond demand. As a result, De Beers rough prices were about 20% to 25% above open-market rough tender prices.
De Beers, not wanting to force its sightholders to dump polished to buy its rough, allowed sightholders to delay purchases to the end of year. Now, at the end of year, De Beers is lowering its prices to be more in line with polished.
De Beers’ rough prices are still too expensive, but its lower rough prices will allow sightholders to lose less money or make some money if they know to whom and how to sell.
It should be clear that lower rough prices will not necessarily force a similar decline in polished prices. Retailers are not dropping polished prices this holiday season because De Beers dropped its rough prices in December. The big question is if people in the diamond trade know how to make money. De Beers’ lower prices are an opportunity to make money, not drop polished prices.
Sure, supplier competition may help you buy better, but that does not mean you have to sell at lower prices. If you are honestly adding value, if you know what you are doing, lower rough prices mean more profits, not lower polished prices.
There is no guarantee that Indian manufacturers won’t kill themselves by buying too much rough and dumping polished. But who cares? In this market, it doesn’t matter what Indians do. The only thing that really matters is what US retailers do, and they are not going to drop natural polished diamond prices because rough is cheaper or Indians are dumping goods.
Natural diamond retailers have already lost the price-competition buyer to synthetics. If a customer’s primary decision basis is price, they will buy synthetics and you can’t sell them naturals anyway. The only way you can now sell natural diamonds is by adding value and selling to people who have money and want to buy luxury. The future for natural diamonds is not price competition but luxury added value.
I don’t think polished prices will fall now because of De Beers’ lower rough prices. They may fall because of dishonest synthetic competition, but De Beers had to lower prices so its customers could make a living.
The natural diamond market is shifting direction from a supply-driven market to a demand-driven market. There is lots of money to be made. You just need to know what to sell, how to sell and to whom to sell.
Happy holidays.
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