Sight Letter
9th December 2011
Dear Friends
The final Sight of 2011 is estimated around $460m.
For a second successive month the DTC made improvement to many box presentations in terms of improved size proportions, and better assortments designed to inject further value into the goods, the result of which is considered by most to be in the region of +5-8%.
The DTC have undoubtedly listened to the Sightholders, and in terms of price/box value the DTC goods look poised to be in a better place as we move towards 2012. Despite this some Sightholders still believe that more needs to be done to align DTC boxes to current market conditions but it seems unlikely they will make further adjustments to box presentations in the near future.
The industry certainly still faces its challenges. Excessive rough buying in the first half of the year as cost prices and market premiums increased steadily have resulted in high levels of rough stock in the cutting centres, all purchased at higher prices than today. The overriding global economic situation is impacting our industry like any other and manufacturers currently have little appetite to buy and when they do they are faced with a wide choice from which to purchase.
The consumer centres have also been affected. In China and the Far East, the market that during 2010/11was to be the counter balance to a waning US market, polished demand has slowed significantly. This might indicate that the rapid growth in polished demand witnessed over the past year was more to do with the well publicised expansion of jewellery stores across the Tier 2/3 cities than directly to an increase at the consumer level. These numerous new jewellery stores are also holding stocks purchased at the height of the market. Despite this, expectations for the Chinese New Year are good.
In India we are also seeing a slower than expected demand for diamond jewellery. The devaluation of the Rupee by between 5-10%, the high price of gold, and a volatile stock market have all contributed to the consumer slowdown.
Although a low level of steady sales are maintained across the European markets, these generally remain quiet and unexciting.
America by contrast looks set to perform above expectation this season as consumers maintain their demand for diamond jewellery.
In the next 10 days (precise date still to be confirmed) the DTC will announce the results of the latest Sightholder Selection Process. In a pre-emptive strike to dampen expectation DTC sales staff has been highlighting the significant reduction in the volume of goods they will have for sale in the coming 3 years in London. The lack of Russian goods, the sale of 3 mines in South Africa, the manufacturing supply obligations to Botswana, South Africa, Namibia and Canada, and the 10-15% “window” of production for trading in Botswana as agreed in the new contract, have all contributed significantly to an already reduced forecast carat production, and increased tremendously the competition for goods that will be available for sale to DTC London Sightholders. Regardless of the reasons this will be a major concern to all existing buyers in the future who have enjoyed and wish to continue a long term relationship with the DTC.
On behalf of all of us at H.Goldie and Co Ltd I would like to wish all our friends and colleagues a Happy Christmas and a Healthy and Prosperous 2012.
With warm regards
Mike Aggett
Managing Director