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De Beers expanding rough customer base
Beginning in March 2015, companies that are not De Beers sightholders will have the opportunity to compete for the rough diamonds that weren’t offered to, or refused by, sightholders, and will be known as “accredited buyers.”
London--Beginning in March 2015, companies that are not De Beers sightholders will have the opportunity to compete for the rough diamonds that weren’t offered to, or refused by, sightholders, and will be known as “accredited buyers.”
Accredited buyers will have the chance to purchase ex-plan: rough that falls outside of the intention to offer (ITO), the 12-month forecast of what De Beers intends to offer each sightholder based on the size, clarity, etc. of diamonds they normally need. De Beers said it expects to have an “enlarged pool” of ex-plan availability in the next contract period, as it makes more rough available through this channel to give different diamond companies, not just sightholders, the ability to show demand for its diamonds.
Accredited buyers also can compete for the rough diamonds that were in boxes refused by sightholders.
In order to qualify as an accredited buyer, companies will need to meet many of the same criteria as De Beers’ sightholders and auction customers do; in short, they need to have purchased a certain amount of rough diamonds in the year prior to the beginning of the contract period, adhere to De Beers’ ethics principles and meet certain financial requirements.
De Beers sells 90 percent of its rough diamonds through its global sightholder system (GSS), with the remaining 10 percent sold via De Beers Auction Sales, formerly known as Diamdel.
In this current contract period, De Beers has 83 sightholders. The company would not give an estimate on how many sightholders it anticipates accepting in the next contract period, nor on how many accredited buyers it expects to have.
In addition to the accredited buyers, De Beers is adding another wrinkle to its next three-year contract period--“Strategic Supply,” which will be available by invitation only to companies that “drive value addition,” such as by creating consumer demand for diamonds.
De Beers spokesman David Johnson said invitations for Strategic Supply can go to any diamond company that De Beers perceives as adding value to the diamond pipeline, whether they are sightholders, accredited buyers, auction sales customers or none of the above.
Invites to apply for strategic supply are scheduled to be sent on Dec. 1, and Johnson said those accepted will become sightholders. Strategic Supply will be offered on a 12-month basis, like ITOs, but will not renew automatically during the three-year sightholder contract period. A company invited and
accepted for Strategic Supply for 2015-2016, for example, will not necessarily receive Strategic Supply for 2016-2017.
When asked if Strategic Supply was a way of rewarding companies that currently contribute to the generic marketing of diamonds--something De Beers used to do on a grand scale before its share of the world’s supply of rough dwindled--Johnson said, “Our concern is the value of the diamond industry.” He said Strategic Supply does give De Beers the ability to get rough diamonds into the hands of companies that are stoking consumer demand, though he also notes these diamonds could go to companies that add value at other points in the supply pipeline, such as in cutting and polishing.
When asked how De Beers sees the rough diamonds going through the GSS being divvied up among all of its buyers and channels--including these new accredited buyers and the rough being pushed through Strategic Supply--Johnson said the company is “not drawing lines” but estimates that the “great majority” of its rough diamonds will continue to be sold to sightholders through the ITOs.
The next contract period for De Beers’ sightholders begins in March 2015 and extends for three years, through March 2018. More information about the new contract period is available at DeBeersSightholder.com.
The deadline for submission of sightholder applications is Oct. 17. De Beers said it has simplified the sightholder application process, eliminating the complex Contract Proposal Questionnaire, or CPQ, and accepting companies as sightholders based on rough purchases, financial stability and transparency and adherence to De Beers’ ethical requirements.
De Beers will continue to allow companies that are customers of its auction sales arm to apply to become sightholders in the middle of the contract period. Johnson said accredited buyers also will have this opportunity.
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