De Beers Looking to Curb Diamond Price Volatility

The Wall Street Journal reported that De Beers is in the midst of introducing new rules to the diamond-buying arena. Among other things, the diamond powerhouse is asking its customers to “present their accounts in accordance with international standards.” They will also “face limits on debt levels.”

The move may benefit the industry in the long term.

As quoted in the market news:

De Beers’ changes could help break a stop-start pattern. When demand is seasonally good and liquidity abundant, diamantaires gobble up stock, often at higher prices. That puts expensive rough stones into the manufacturing chain, hurting profitability if or when the market slows. Added to limited transparency in the sector, this has made banks wary. Better accounts should reassure them. A better-capitalized sector could also smooth out buying cycles, even if it means the sector runs with a lower inventory level.

A more secure financial footing for the sector will take time, suggesting a tough year as lenders pull back and over-capacity in the cutting sector is addressed: De Beers’ customers opted not to buy about a fifth of stock on offer at March’s sale. But to the benefit of diamond miners large and small, it should ultimately mean less scope for divergence between rough and polished prices, and less volatility overall.

Click here to read the full article from The Wall Street Journal.