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DTC July Sight Estimated at $450M

Kristall Seeks Capital From Smolensk, Gold Jewelry Demand Weakens.
Sep 1, 2010 10:05 AM   By Rapaport
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The Diamond Trading Company’s (DTC) July sight achieved an estimated value of $450 million, according to feedback received by Rapaport News. Interviews with sightholders indicated that prices remained stable and that no additional goods in the form of ex-plan were supplied by the De Beers subsidiary.

Sightholders were encouraged by the sight, as they had expected prices to soften after the declines that were evident at the BHP Billiton tender. One rough diamond professional noted that there has been a slight softening of premiums so that many DTC boxes are now trading at about 2 percent to 3 percent, while some still fetch a premium of about 8 percent.

DTC spokesperson Louise Prior agreed that this time, sightholders appeared to be more confident and observed strong applications for goods.

Still others indicated that the market remains uncertain ahead of the end-of-year rush. While some said they expected the August sight to be larger, others said that according to the DTC delivery plan, they anticipated sights valued at around $450 million for the remainder of the year. One sightholder felt the De Beers production schedule was keeping demand and prices up and that more rough was needed to “cool an element of speculation on the market.” The results of the August sight were not available at press time.

Kristall Seeks Capital From Smolensk

A capital injection for Kristall, Russia’s largest diamond manufacturer, will enable the state-owned company to generate no less than $1.7 billion in revenue for the next five years and payments to the budget will rise to $66 million a year. Sergei Antufyev, the governor of Smolensk region, where Kristall is based, made the comment in a letter to Prime Minister Vladimir Putin, according to Interfax.

Kristall is currently experiencing a shortfall in the working capital needed to purchase rough. “In order to ensure an unbroken production process, working capital of no less than $233.3 million (RUB 7 billion) is required,” the company’s letter stated. “As of January 1, 2010, the company was only able to cover 10 percent of that shortfall from internal sources; the remaining 90 percent was borrowed.”

Kristall’s sales totaled about $200 million in 2009. It has targeted sales in the range of $220 million to $240 million for 2010. A capital increase of $133 million for Kristall is already contained in amendments to the 2010 budget. The supplementary shares Kristall issues could be paid with rough from Gokhran, the state repository. However, a source at Gokhran told Interfax that the final mechanism for the injection has not been determined yet.

A Kristall official declined to comment on the situation. Kristall had asked the state to provide a capital injection via a share issue in 2009. General director Maxim Shkadov told Interfax that the shortfall of working capital was making the company dependent upon bank loans, whose terms have tightened since the crisis began.

Gold Jewelry Demand Weakens

World gold demand rose by 36 percent year on year during the second quarter that ended on June 30, 2010 due to strong investment demand, the World Gold Council (WDC) reported. The organization noted that demand will remain “robust” for the remainder of 2010, given the current strong consumer demand from India and China and safe-haven buying by global investors. By value, gold demand rose 77 percent to $40.4 billion and reached new record highs, spiking above $1,260 per ounce in June.

Global jewelry demand fell 5 percent year on year for the quarter, based on surging gold prices. Gold jewelry demand in India, the largest market, fell 2 percent, which translated to a 20 percent increase in the value of demand to $4.6 billion (INR 216 billion). China experienced a gold jewelry demand increase of 5 percent to 75.4 tons. While demand was hindered by poor weather conditions, it was still 35 percent higher by value at approximately $2,912 per ton (CNY 19.8 billion).

Investment demand enjoyed strong growth during the second quarter, as well, posting a 118 percent annual increase. The largest contribution came from the exchange traded fund (ETF) segment, which grew by 414 percent.


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