Sight Letter
19th February 2010
Dear Friends
The February Sight is estimated to be slightly smaller than January at $540m. Unlike January there were very few additional allocations during the Sight.
Following the extranet announcement regarding the DTC’s pricing policy which came out on Monday15th February, Mahiar confirmed at the pre Sight Brokers meeting that a further price adjustment averaging “high single digits” had been applied to this month’s presentations along with adjustments in box presentations.
The recent concerns of the market which were based around the ongoing speculation affecting the rough market was addressed abruptly by Mondays Extranet announcement informing clients of the forthcoming price increase. For the most part Pre Sight box trading ceased immediately as clients waited to see the boxes on Wednesday. The general response to the price changes has been positive despite the reduction in margins. Firstly, many Sightholders had felt that having a more significant increase was the only way to stop the speculative upward trend in rough price as previous modest increases had simply been absorbed. Second, the official announcement by DTC will undoubtedly help Sightholders in their negotiations with their downstream partners and help them to pass on the cumulative recent increases, and thirdly the rough market was becoming a genuine concern to many as prices spiralled out of control in relation to polished prices both in the current market and the foreseeable future.
The DTC has stated that they would now like to see a more stable rough market and hope to keep their prices at current levels for the coming months, something that will be welcomed by the market in general. The challenge will of course be maintaining the balance between mining production and rough demand. To date we have seen a steadily increasing demand for rough as the manufacturing markets recover and production returns to former levels. However with a DTC Sight in each of the first four months of the year, and regular sales by Alrosa, BHP, Rio Tinto and Harry Winston, not to mention the other African productions, the inflow of rough will be considerable. This coupled with the forthcoming Jewish and Indian holiday periods should all suggest a softening in the rough markets and a return to more stable pricing.
The effects of the price adjustments are already being felt positively in Antwerp where premiums on DTC boxes have reduced from last month’s levels and sellers are experiencing resistance to high asking prices. It is felt that most DTC boxes will command premiums of between 8-12% when business is concluded. Polished demand remains stable with prices continuing their steady recovery.
The Sightholders now eagerly await the next ITO announcement which we believe will be made around the 18th March and indicate the individual sales levels to customers through to April 2011. DTC has indicated that in the short term mining levels will increase by around 20% on average, and this coupled with purchase history and additions from the successful Business Continuity Programme will form the basis for future allocations.
Indian Sightholders were informed that the Responsible Jewellery Council will be visiting Mumbai between the 2- 4thMarch, giving the Sightholders the valuable opportunity to voice their views and concerns regarding minimum wages and working conditions, and in doing so give the Council valuable insights into what are considered to be normal Indian working practices.
With warm regards
Mike Aggett
Managing Director