Diamdel Markets Pandora’s Boxes
January 31, 08It is quite incomprehensible how De Beers trading subsidiary Diamdel is trying to prove how all the company’s rhetoric
What Diamdel may not realize is that the decision to hold online auctions will not just confuse the corporate image of De Beers and its relationship with stakeholders, it will also whet the appetite of the producer countries’ governments who suddenly realize how much money one can earn if one discards long-term sustain
Unquestion
For those who have forgotten the classics, in Greek mythology, Pandora was the first woman. Each god helped create her by giving her unique gifts. Zeus ordered Hephaestus to create her as part of the punishment of mankind for Prometheus' theft of the secret of fire, and all the gods joined in offering her seductive gifts.
According to the myth, Pandora was irresistible to men. She would lure her admirers and offer them goodies from a jar commonly referred to as Pandora's Box, releasing all the evils of mankind — greed, vanity, slander, envy, pining — leaving only hope inside once she had closed it again.
Diamdel may not have released all the evils of mankind, but it surely has unleashed a “concept” that holds the potential to generate unintended consequences – a kind of snowball effect that will backfire mostly on the organization itself. According to Diamdel, 16 lots were made avail
In a corporate statement, Diamdel’s managing director Neil Ventura says, “We are delighted that the first auction has worked so well and in particular how we have been
DTC Lists + 18%
What actually transpired is as follows: At the online auction, three DTC boxes were offered plus some outside parcels and a large stone. The main boxes were chips (three to eight grainers) and melees. At the auction a straight cut (abschnit) of the main boxes were offered in some lots, while the remaining halves were offered separately, subdivided and assorted by sizes. These original main DTC boxes, sold through the DTC’s system, were trading in the market at premiums of nine to 13 percent. Those premiums were needed by the clients in order to successfully manufacture the goods while keeping various downstream marketing commitments. The very same boxes, however, were sold at the auction at three to six percent
The story on the part of the boxes that were sorted down by sizes is even more interesting. Their sales prices reached 18 percent
There is nothing wrong for Diamdel to try to recuperate some of its huge trading losses over the past years by trying to extract the last dollar out of a very speculative market. Indeed, one might congratulate Diamdel on a new initiative. But we are quite puzzled how Diamdel can suggest that it is “delighted that it’s been
When De Beers decided way back at the beginning of this century that it wanted to sell rough diamonds in a legal manner without violating antitrust laws, it started a successful dialogue with the European Commission’s (EC) Anti-Competition Authorities. I remember that in one of the earlier meetings between
De Beers expanded enormous efforts in explaining to the EC that it was impossible to support a manufacturing business in a system where a manufacturer would not know beforehand whether he would have goods to supply his thousands of workers. De Beers explained to the EC that it was the continuity of stable assortments and sustainable prices that enable diamond manufacturers to operate the businesses and to make downstream polished supply commitments. Diamdel was presented to the EC as a training ground for future clients. The task of the company was really to help smaller businesses to get used to DTC assortments and for those players to develop long-term businesses.
The auction this week may have been for a very small amount (something like $5 million at most), but it is the whole idea that is so puzzling. De Beers’ management will have the satisfaction that it literally got the very last dollar out of its clients. For that, maybe congratulations are in order. But it makes one wonder what the company’s mining partners in southern Africa and elsewhere will think.
Couldn’t they do the same thing? Today, Diamdel is selling only a fraction of its avail
And then, there is a further intriguing question. De Beers, in its marketing agreements with its partners, has committed itself not to sell the goods
Will these auctions have repercussions on the DTC price lists or on the prices that De Beers must pay to the mining companies? In Greek mythology, after Pandora’s Box has been emptied, the only thing that is left in it is “hope.” What isn’t clear is hope for whom, hope for what…
Have a nice weekend.