2004

Diamond Prices Raised by DeBeers

April 2004

De Beers just announced it will raise prices 5% at its latest sight. This is the company’s second price rise this year. The first was 3% in January.

The price increase shows De Beers is generally optimistic about the market.

“The price increase reflects the underlying supply and demand situation,” a statement said. “A strong Christmas season in western markets was coupled with double-digit growth in both Asia and Arabia, improvements in demand in Japan and a better than expected second half in greater China ...These positive factors have led to re-stocking throughout the pipeline, reflected by strong cutting-center demand for rough.”

The price increase was said to be 5%, but this is only an average, impacting not all stones equally. Some categories likely went up more. This 5% jump is not only the second raise in a year but the fifth raise in nearly two years. Clearly the balance between demand and supply is turning out to be healthier than anyone dreamed it could be with a weakened De Beers.

In fact, this price increase is yet another show of strength from De Beers — which has a smaller share of market but still sets pricing trends. After its increase, the Russians, Canadians, and the other producers all followed suit.

Following the increase, some manufacturers griped to the Israeli press that it will be another burden for them that will further squeeze profits. While we sympathize, we think the increase will likely be passed down to the consumer. All in all, we think this a positive development — and it’s certainly better than the alternative. We could be in an industry where prices go down.