May 10, 2007
Will De Beers Turn Its Business Into A Giant Diamdel?
Posted by Vinod Kuriyan under DTC, De Beers, Diamonds, India, Mining, Rough, Sightholder
De Beers’ Diamond Trading Company (DTC) has lowered the financial bar for the new Supplier Of Choice (SOC2) sightholder applications. Now, anyone in the Indian market with an annual import of $20 million and an export of $30 million can apply to become a sightholder. The result is that there has been something of a mini stampede as rough-starved Indian manufacturers scramble to get a shot at an assured supply of raw material.
“Given what it takes to be a sightholder, most of these people won’t make the grade,” one industry source told me, “it’s all a huge waste of time and effort. But,” he adds quickly, flapping a cautionary arm, “you never know. Maybe the DTC has changed the whole game plan. Maybe they now want a large number of small operators rather than a few giants. They might get a lot more flexibility that way given that rough supplies are short and they have to cut allocations anyway. Smaller, more specific cuts in the allocations of a large number of clients will probably hurt less and cause a lower level of resentment. And they could respond much more flexibly to the changes out there in the marketplace.”
You mean the DTC has practically shut down Diamdel only to make its whole sightholder business model a giant Diamdel? “Unlikely,” say most industry insiders. But the whole rough supply system has and is still changing at bewildering speed. And maybe De Beers sees the future differently. As my source said, you never know.
September 25, 2007 at 10:34 pm
In case DTC does change its game plan to accommodate for smaller operators, then how will this affect the structure of the diamond industry?
(i) Will these companies be able to comply with the requirements of being a “Sight holder” - development of marketing strategies and moving down the diamond pipeline while competing with established players? Will the smaller player become rough traders i.e. procuring from DTC and selling to the “big players”, thus making their profits?
(ii) Will the “big players” develop their mining facilities with strategic. Can this lead to a situation where the “big guys” instead of being on the “SoC” side of DTC land up being on the “Purchaser of Choice (PoC)” of DTC?
September 26, 2007 at 12:19 pm
De Beers’ gameplan isn’t really clear that now. They’re going to announce their Namibian sightholder list in October and the Botswana list some time later. The people who get sights there have to answer the list of questions profiling them plus some additional ones on how much they are going to beneficiate the local cutting industry. Of course, their regular clients are going to grumble at having to lose a share of their sight to these people etc.
All of this makes it clear that selling to a bunch of smaller operators is a lot easier in the long run. But nothing is clear right now, let me reiterate.