DTC Diamdel Allocation Increases  
   By Marc Goldstein Posted: 8/12/2005 2:41 PM   
  The Diamond Trading Company (DTC) intends to increase sales to Diamdel from the $450 mil-lion sold last year to 밶 record amount of up to $550 million in 2005,? the company announced in a joint press release with the World Federation of Diamond Bourses (WFDB) on July 14, 2005.

However, as Lynette Hori, De Beers spokesperson, put it: 밆TC sells the rough to the Diamdel group of companies. It is up to them to decide how to then distribute it among their global operations. Having said that, let me insist, though, that Diamdel sells its rough exclusively to non-DTC-sightholder companies.?

Ernie Blom, vice president of the WFDB, confirms 뱓he way Diamdel is going to split the goods among the diamond centers is certainly an internal matter of the group.?

Unofficial Question
Sources from within the diamond bourses question, unofficially, the reality of this generous offer. Indeed, they don뭪 deny the intent of the offer, but they뭨e also aware that De Beers is itself experiencing a shortage of rough. They feel it is not clear at all what share of this $550 million in goods will reach the market and whether any part of the incremental allocation will be available for Antwerp at all. Paul Dooney of Diamdel points out that 뱓he goods should be a representative range of the products that the DTC is making available for sale through its sightholders. Besides, there shouldn뭪 be any change regarding the allocation of the additional goods through the Diamdel offices.?
Is this increase going to be permanent or is it merely a one-shot operation? According to Blom, 밫his increase of $100 million could hopefully be renewed in the coming years, but it will all depend on the sales of the DTC.? Hori agrees. 밒n the coming years,? she says, 뱓he allocation to Diamdel should be proportionate. However, we can뭪 know now how much the DTC is going to sell in 2006, for example.? This could be construed in a way that implies that the more the DTC sells to its sightholders, the less there is for the secondary market, through Diamdel. But it turns out to be exactly the opposite.
There뭩 a limit to the quantity of goods that Diamdel is allowed to get from the DTC. Based on an agreement with the European Commission (EC), it is a maximum of 10 percent of the total sales by the DTC to its sight-holders. In other words, the more the sightholders get, the more Diamdel could get.

밒n any case,? concludes Blom, 뱖ith the general shortage of rough the market is undergoing today, any incremental source is welcome.? Hori adds, 밫his is already a substantial increase. De Beers is now only producing about 40 percent of the world뭩 production, and we only market about 50 percent. So, people should remember that there are lots of other players out there. Apart from the rough supplied by Diamdel, the secondary market can now find supply from many other sources.? It seems, however, that the other major diamond sources share the same leading clients with the DTC.

Limited Goods
It would be very interesting to know why there뭩 a 10 percent limitation. Both Hori and Blom are specific about it: the limitation is the result of an agreement between the DTC and the EC. It is important to bear in mind that it is not De Beers ? which as a South-African company is not subject to the EC regulations ? that has signed the agreement, but the DTC, which is a United Kingdom company and falls under European law.
What is more appealing is that one of the most particular consequences of this agreement is that it limits the supply of the secondary market in the whole world, as opposed to solely Europe. Indeed, the agreement penalizes the whole industry, as the goods for U.S., Israel, India or Antwerp are treated according to the same EC limitation.
To top it off, it is probable that this agreement seems to have been signed in order to avoid competition distortion. This would mean that, while so many smaller manufacturers cry for rough and complain about the Supplier of Choice (SOC) being unfair, their supply could have been limited precisely because of fair competition considerations.
Hori insists that 밫he level of supplies from the DTC to Diamdel is a proportion of DTC sales ? between 8 percent to 10 percent. This figure is determined by the DTC and is not a decision for the Commission to make. This is a balance we have to strike between our main strategic objective, which is to grow downstream demand for diamonds, and our secondary strategic objective, to maintain a vibrant and dynamic secondary market, which we see as being intrinsic to the health of the industry.? This implies that the DTC is free to decide what percentage is to be sold to Diamdel. However, a source close to De Beers considers the approval of the EC important, as the Commission would not be happy with a big role for Diamdel, as it would be construed as De Beers taking too much control over the secondary market.

Consequently, the most incredible aspect of this issue is certainly that most of those who file complaints before the EC against the SOC are doing it precisely before those who agreed, one way or another, to limit their supply in the first place. Hori insisted, though, that the increase proposed is in no way an answer or a reaction to the various complaints that have been filed recently against the SOC. Moreover, 뱓he increase in supply to Diamdel is not as a result of any agreement with the Commission but as a result of an increase in the level of De Beers overall availability,? she concludes.

A Sham?
There are people, however, who believe that this increase and the accompanying press release are just another window-dressing operation, they say, as is the fact that no sightholders were dropped in June. The goal of this whole operation would be to limit as much as possible the reaction of the EC with respect to the SOC files.

Diamdel Opens in Namibia
De Beers Group Chairman Nicky Oppenheimer, Managing Director Gary Ralfe and the Namibia President Hifikepunye Pohamba, officially opened the offices of Diamdel Namibia in Windhoek.

Diamdel is a customer- and product-focused business that provides rough diamond assortments to more than 500 clients at any one time. Diamdel Namibia is located on the sixth floor in the Namdeb Centre, adjacent to De Beers Marine Namibia. Ultimately, it is intended that Diamdel Namibia will play an instrumental role in helping to support the businesses of local visionary, innovative, and financially sustainable diamantaires, according to a company statement.

Paulus Shituna, Diamdel Namibia뭩 area manager, says 밫hese remain early days for our Namibian operation. We are, however, hugely encouraged and enthused by the task at hand. We at Diamdel Namibia look forward to further drawing upon the considerable intellectual capital within the global Diamdel group towards assisting our locally based clients in developing their businesses in the future.?

Ralfe says the Group뭩 overall intention to develop and enhance the unique partnership between Namibia and De Beers (Namdeb), furthers a long-held relationship, which is currently in its eleventh year.

밒n November [2004], we celebrated the 10th anniversary of Namdeb at a gala dinner here in Windhoek,? Ralfe says. 밯e believe Namdeb is an admirable example of what is achievable when the public sector and private sector work together.?

Frank Auger, managing director of Diamdel NV, says that the office opening in Namibia is 밶 significant step towards De Beers further supporting the entrepreneurial spirit of the local industry with Diamdel뭩 expertise, experience and passion for the developing [secondary] industry.?

Positive Outlook Seen by WFDB President
Shmuel Schnitzer, president of WFDB, said that the DTC뭩 commitment to increase Diamdel뭩 sales to $550 million in 2005 represents a major achievement for the industry. As a result of the agreement, nonsightholders will receive an additional 10 percent of rough diamonds as compared to what was available in 2004, Schnitzer told Rapaport News Service.

Israel receives 20 percent of the DTC뭩 diamond allocations. More than $110 million will reach the Israeli market through Diamdel as a result of the new agreement. According to the WFDB president, the exact kind of rough will be agreed upon by Diamdel and the manufacturers themselves. Usually Diamdel supplies Israel with diamonds that are appropriate to its industry, no less than .50 points to .75 points.

The new agreement will help to alleviate the large shortage in rough diamonds and help to level the price, which is currently very high. Very high premiums are being paid for the boxes, making it difficult for nonsightholders to compete. 밒 am sure Diamdel will find its way to sell these goods to the right customers. It will help,? says Schnitzer.
Another point discussed at the meeting in London was that De Beers marketing arm, the Diamond Trading Company (DTC), has been carrying the bulk of the marketing expenses. 밒 think it is time for change and that the other producers participate and help others get hold of rough,? says Schnitzer. DTC invests hundreds of millions in marketing. 밯e fully support it,? he says.

The DTC will strengthen the importance of the WFDB trademark in the public뭩 eyes. The WFDB mark is very important in the industry asit enables the diamantaire to prove his integrity, which is important in promoting consumer confidence.

The agreements reached by the DTC and the WFDB represent years of ongoing dialogue between the two groups. 밫his is only the beginning,? says Schnitzer.
Regarding ALROSA뭩 intention to create its own sightholder list, Schnitzer says, 밿t is a very positive thing that they will have a sightholder list. Any move that increases the availability of rough is better. If ALROSA changes their marketing policy through sightholders, then this is healthy for the entire diamond industry.?