Thursday , January 28 2021

The elite diamond buying club shrinks when De Beers murders old customers



Pedestrians pass by a De Beers store in Shanghai.

Pedestrians pass by a De Beers store in Shanghai.

Alex Tai / SOUP Images / LightRocket via Getty Images

  • De Beers has cut some of its long-term diamond buyers, an action that comes after a year of reflecting on the changes.
  • Customers of the historic mining company, ranging from Indian and Israeli family businesses to jewelers like Tiffany & Co., have often been seen as a weak point in the industry.
  • The industry produces about 15,000 different categories of diamonds, and De Beers wants a smaller number of companies specializing in each of them, giving them more pricing power and greater resistance to recessions.

De Beers has cut some of its long-term diamond buyers, marking one of the most important changes in the way the miner sells gems since the end of its monopoly 20 years ago.

De Beers staff spent Wednesday calling its 80 hand-picked customers, and some said they will lose their place at the top of the industry, according to people familiar with the situation. The world’s largest diamond supplier has spent more than a year reflecting on the changes, which are designed to channel more stones into fewer hands, people said, asking not to be identified as the talks were private. .

The industry produces about 15,000 different categories of diamonds, and De Beers wants a smaller number of companies specializing in each of them, giving them more pricing power and greater resistance to recessions. It is still unclear how many buyers have lost their status, but there are probably about ten, according to people.

A De Beers spokesman declined to comment.

The Anglo-American [JSE:AGL] The unit wants to reinforce an oil pipeline that goes from mines in countries like Botswana to jewelry stores in Hong Kong and New York, according to people.

De Beers was forced to make sharp price cuts last year as the coronavirus halted the industry in the first half, although the sector has bounced back strongly.

Customers of the historic mining company, ranging from Indian and Israeli family businesses to jewelry units like Tiffany & Co., have often been seen as a weak point in the industry. Their fragmented nature means they have no pricing power with both mining companies and jewelry retailers and are often the hardest hit during financial recessions, putting pressure on diamond prices.

Expired contracts

As De Beers ’current six-year contracts with buyers expire in late 2020, the company asked its customers, known as viewers, to re-introduce one of three categories: distributors, manufacturers and integrated retailers. The plan is designed to target specific packages of diamonds to buyers who can add maximum value to rough stones.

While some buyers have lost their viewer status, the changes are deeper. Others have gone from being international buyers, who can manufacture in places like India where they have a cost advantage, to local buyers. The latter can only be made in countries where diamonds are mined, such as South Africa and Botswana.

De Beers has also reduced the number of buyers designated as traders rather than manufacturers, especially in smaller stones, a segment that has performed poorly in recent years.

Buyers will find out more details about their condition, including how many diamonds they are entitled to buy, in the coming months.

The world’s largest producer has been struggling with how to sell diamonds after several difficult years for companies that cut, polish and market gems in the world.


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