De Beers to sell large size diamonds through forward contracts

Will sell +2 carat diamonds through the route for the first time

In a plus for Indian processors, global mining major De Beers has decided to sell large-size diamonds for the first time through forward contracts.

It has hitherto sold rough diamonds of up to 2 carats. It now plans to sell over 2 carats of roughs through forward contract sales (FCS) in its scheduled auction during March. De Beers is the major source of roughs in the world.

Around 11 of 13 roughs sold are cut and polished in India and processors here have developed the skill and technology to handle larger sizes. As a rule, these go elsewhere, such as Belgium, for cutting and polishing. Widening De Beers’ product portfolio through FCS will enhance the availability of larger-size roughs for Indian processors.

“FCS got off to a successful start in 2014, with over 300 contracts sold and customers demonstrating a willingness to pay a 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 for auction sales.

Sourcing of roughs is otherwise had by participating in the physical auctions at mine sites or at trading centres like Belgium, Dubai and Singapore. Apart from getting to be sightholder, the term for an entity on the Diamond Trading Company's (DTC) list of authorised bulk purchasers of roughs. DTC is controlled by De Beers.

In response to customer demand for greater availability of forward contracts in the first half of the year and for increased range and quantity, De Beers proposes to conduct a single FCS event in March. Registered customers will have the opportunity to bid for future supply of a wider range of products (from over 2 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 sells a little less than 10 per cent of its annual output of roughs through its online subsidiary, Diamdel. The remaining 90 per cent goes via long-term contracts i.e. sightholding.

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

India’s import of roughs was 114.04 million carats in April-December 2014, as compared to 126.22 mn carats in the corresponding period a year before. In 2013-14, our import of roughs was 161.91 mn carats.

De Beers’ full-year output of roughs rose by 12 per cent to 31.2 mn carats in 2013 as compared with 27.9 mn carats the previous year.