DeBeers,diamond

You can always tell when De Beers is setting the stage for a price increase on the rough it sells to its 80 select customers called "sightholders" at its sales held every five weeks called "sights."

Price hikes are the last part of a three-stage cycle.

First come serious shortages on high-demand items. For more than a year, De Beers has been very stingy with its goods that yield stones between 1 1/2 and 3 carats in top colors and clarities. The company says the shortages are actual not artificial, the result of lower world production.

Second come premiums on scarce goods. Whether or not the present shortages are contrived, they have forced cutters to pay premiums on the open market to supplement supplies. For months now, dealers have been paying steadily higher prices for both rough and polished diamonds.

Third comes an official De Beers' price hike. After months of watching its customers sell uncut rough at extra cost to desperate cutters, De Beers announced a 5% price hike to take effect in late August. Supposedly, this was done to stop any profiteering by cutters. But, in reality, it was the final phase and foregone conclusion of a pricing cycle that happens time and time again.

Although dealers grumbled about the price hike, there was a silver lining in the news. As a rule, De Beers resorts to this tactic only when it feels there is strength in the economy and higher prices can be sustained. In short, raising prices is De Beers way of signaling confidence. We'll know if the company's optimism is justified when holiday shopping begins in October.

 

 

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