De Beers Raises Rough Prices Again

RAPAPORT... De Beers sold $550 million worth of goods at its May salescycle as strong consumer demand boosted the rough-diamond market.The miner raised prices for the third consecutive sight amidthe strong demand, with the emphasis on larger categories, sources told RapaportNews. De Beers made certain price changes by adjusting the way it sorts stonesinto boxes, a rough-diamond broker noted. "We saw robust demand for De Beers' rough diamonds,reflecting continued strong demand for diamond jewelry, especially fromAmerican consumers, as we head toward the important JCK Las Vegas trade showat the start of June," De Beers CEO Bruce Cleaver said Tuesday. Proceeds were 5% higher than the April sales cycle, and also5% above the value of De Beers' equivalent cycle a year ago, the miner reported.Dealer premiums - the markup at which traders can sell DeBeers rough on the secondary market - crept up to 4.9% in May from 4.4% inApril, according to a report by Dudu Harari of diamond broker Bluedax. Roughdiamonds are in short supply, prompting traders to ask for higher prices on thesecondary market, Harari added. However, midstream profits remain low as the increase inrough prices does not correspond to polished demand, even amid positiveconsumer sentiment, sources noted. The RapNet Diamond Index (RAPI?,,?) for 1-carat polished increased 2.8% in the first four months of the year, but was 1.3% lower than a year ago."While the market for rough continues to be firm, mostly dueto shortages, profitability remains a challenge for manufacturers,"Harari said. A continuation of the upward trend for rough prices couldmean manufacturers' polished sales don't even cover the cost of buying and processingrough, the CEO of an Israel-based sightholder told Rapaport News. "Margins are very, very tight," the sightholder said. "Wehad profitability in the first quarter, but now it's shrunk to zero. If itcarries on like this, it will be in the minus." De Beers sells the vast majority of its rough diamonds at 10sights throughout the year inGaborone, Botswana. Sales for the May cycle include last week's sight, as wellas rough auctions. Revenue from the miner's first four sales are down 3% yearon year to $2.31 billion, according to Rapaport calculations.Global consumer demand for diamond jewelry grew 2% to anall-time high of $82 billion last year, fueled by a strong US consumer marketand a recovery in the luxury sector in greater China, De Beers reported lastweek.