The first major event of the year was last week’s overall 3% price increase by De Beers’. On top of that, sightholders are looking at an extra charge of probably 2%, in order to contribute to De Beers’ promotional budget. All together, this is already an overall increase of over 5% on rough prices, with bigger sizes and better qualities carrying higher increases.
 
In the following months, we are going through a new selection round of ‘Supplier of Choice’, in other words, the selection of which company will continue to belong to the small group of clients of De Beers’, which underperforming ones will be ousted, and which new companies might be added to the list.
 
With the race on to stay in the sightholders-game, cutters cannot afford to appear weak. This puts a very high bottom under rough prices, and even with many manufacturers making losses on the current prices, they will continue to take in as much rough as possible.
 
Basically, in 2005, there is nothing but upward pressure on rough prices. On the supply-side, Alrosa will probably start selling more through its own channels, and we will also see a race between manufacturers, to get in here.
 
Furthermore, in producing countries, we will see more pressure for local beneficiation. This will prevent the most interesting rough from becoming available on the Antwerp market.
 
The underlying reason for this upward pressure on rough prices is simple. On the supply-side, we have seen very few developments of substantial new mines in the last years. And for a manufacturer, what is the point of having a profitable cutting operation, if one cannot buy the rough needed to run that factory.
 
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