DTC Feb Sight Estimated at $110M

Participants in the Diamond Trading Company's (DTC) February sight reported a slight increase in activity and interest in goods, although the sight remained comparatively very small. While somewhat hesitant to commit to a figure, sight participants estimated the sight's value at about $110 million. “It’s very difficult to assess the sights in this environment,” said one observer, but noted that there was "a little more movement in goods than the previous two sights.” He speculated that sightholders have gotten somewhat used to the current market, and are now more focused on doing business, buying goods from DTC and selling in the market. One sightholder agreed that there was more of a buzz at the sight, but suspected that “there is a lot of window-shopping going on, and not so much buying.” Louise Prior, DTC spokesperson, also noted a more positive mood at the February sight than there had been in December and January, and reported an improvement in sales from those previous two sights. She declined to project whether this signaled some stabilization of the market. Rapaport News estimated the December and January sights as worth about $100 million and $80 million, respectively. Sales during the past three months have been about 83 percent below those recorded in the three DTC sights from December 2007 through February 2008, with an estimated total of $1.7 billion.Prices Drop But Still Above MarketAll of the February sight participants surveyed by Rapaport News reported some price revision but agreed that DTC's prices were still above other rough sources in the market. One sightholder estimated that DTC goods were still 15 to 20 percent too high, and behind the market. “DTC is staying firm on their pricing,” said another sightholder. Some boxes reflected the shift in the polished market value, mainly on the smaller goods, "maybe 3 grainers and down, where there is more interest at the moment,” said one. The bigger the stones, the larger the gap was between DTC prices and market value, he explained. De Beers reported that its rough diamond prices rose by an average of 14 percent in 2008, on the back of the boom in the market in the first half of the year. A company spokesperson told Rapaport News that lower consumer demand for most categories of polished diamonds in the second half “led to downward pressure on DTC prices and lower purchase requirements from sightholders whilst they adjusted to liquidity and inventory-level challenges and the global financing situation.” The company reported in August 2008 that prices had risen by a cumulative 16 percent for the year to date. According to Rapaport estimates, the decline in the fourth quarter brought prices in December to about 20 percent lower than they were in August. RBC Capital Markets estimated this week in a note about the Harry Winston Diamond Corporation that rough diamond prices fell approximately 40 percent in the final quarter of 2008. De Beers has also cut its production significantly to meet lower demand from sightholders, which has helped it maintain its price levels. Second Sight weekIn an unprecedented move, DTC carried over some rejected stock from the February sight after it closed on Friday, February 27, to sell to sightholders this week. The company is offering rejected boxes to sightholders that need specific items or that need goods that weren’t in their Intention to offer (ITO). Prior said that DTC is gathering feedback from sightholders to assess the success of the initiative. She added that the company has not decided to go to the secondary market, as DTC hinted it might in January, but it is keeping all its options open. Bracing for a Challenging Year Varda Shine, DTC's managing director, said in the recently published De Beers annual report that “a combination of high inventory levels in the cutting centers and a forecast for a further marginal contraction in 2009 consumer demand is expected to impact global rough sales significantly.” The outlook for trading in southern Africa in 2009 also remains challenging, given the weak polished market and working capital constraints, she added. DTC ended 2008 with sales flat at $5.93 billion across its operations in London, Botswana, Namibia and South Africa. Sales from DTC Botswana (DTCB) and Namibia DTC (NDTC) were $367 million and $172 million, respectively, while DTC South Africa achieved sales of $574 million, De Beers reported. Shine said that DTC would focus on achieving "further cost efficiencies" in 2009's "pressured trading environment." (source: Rapaport News Wire)