De Beers to sell large size diamond through forward contract

Move will benefit Indian processors for short-term raw material security, India processes around 90% of world diamond output

In a major benefit to Indian diamond processors, global mining major De Beers has decided to sell large diamonds for the first time through forward contract.

Since its launch in 2014, De Beers has been selling smaller rough diamonds of up to two carats. But, the company is planning to sell over two carats of rough diamond for the first time through forward contract sales (FCS) in its scheduled auction sale in March this year.

Already processing 11 out of 13 rough diamonds, Indian processors have developed skills and technologies to cut and polish large size diamonds over a period of time. While India is known for processing of smaller size rough diamonds, large ones move to other major processing centres like Belgium for cutting and polishing. Widening De Beers' product portfolio through FCS will enhance availability of large size rough diamond for Indian processors also.

"FCS got off to a successful start in 2014 with over 300 contracts sold and customers demonstrating a willingness to pay premium for short term security of supply. This year, in response to customer feedback, a wider range of products will be made available including some of our +2 carat products for the first time," said Neil Ventura, De Beers' Executive Vice President of auction sales.

Normally see participation from non sightholders, forward contracts ensure short term availability of rough diamonds which helps businessmen plan for future growth. Other means of rough sourcing are participating in the physical auctions at minesites or trading centres like Belgium, Dubai and Singapore; and sightholding.

In response to customer demand for greater availability of forward contracts in the first half of the year and for increased range and quantity of products, De Beers proposes to conduct a single FCS event in March 2015. At this event, registered customers will have the opportunity to bid for future supply of a wider range of products (from over two carats, grainers and smalls categories), available in multiple-unit volumes and over one to four cycle-contract durations.

"The one-off set of FCS auctions will provide customers with a highly convenient way to secure the products they require for delivery in any one of the four cycles between March and July, or any combination of these delivery periods that suit their needs," said Ventura.

De Beers sales less than 10 per cent of its annual rough diamond output through its online subsidiary Diamdel. The remaining 90 per cent of its annual output, the company sales through long term contracts i.e. sightholding.

"Normally, large size diamond fetches premiums due to its availability in small numbers. Online sales will, therefore, allow De Beers to understand market pulse in terms of pricing," said a senior official with an export promotion body.

Meanwhile, India's import of rough diamond was recorded at 114.04 million carats between April - December 2014 as compared to 126.22 million carats in the corresponding period last year, witnessing thereby a decline of 9.65 per cent. During the financial year 2013-14, India's rough diamond import was recorded at 161.91 million carats, data compiled by the apex body the Gems and Jewellery Export Promotion Council (GJEPC) showed.

De Beers' full year rough production rose by 12 per cent to 31.2 million carats in 2013 as compared with 27.9 million carats in the previous year.