Monday, January 25, 2021

ODC diamond sales slows in 2018:H1

Botswana’s wholly owned diamond trading company, Okavango Diamond Company, has reported a 16 percent drop in diamond sales in the first half of the year, signalling that the company will likely record another drop in sales as the diamond industry descends to seasonal slowdown.

This week the company reported it sold 1.778 million carats in the first half of 2018, down 1.6 percent from the corresponding period last year. As a result the sales value dropped 16 percent to $260 million.

Marcus Te Haar, Okavango Diamond Company managing director said: “A favorable rough diamond market over this period has meant ODC has generated healthy sales for the first half of 2018 despite not being able to offer larger volumes to our customers compared to the same period in 2017.”

Ter Haar added that customers from the United States and the Far East largely drove demand in the six months through June. Looking ahead, he said sales for the remainder of 2018 were unlikely to be as strong as in the first half due to an anticipated cyclical downturn in the market. “Current indications suggest that a seasonal slowdown in the diamond market has now begun which will have somewhat of a dampening effect on the promising first half,” he said.

The diamond industry is seasonal, with the holiday period from thanksgiving in USA in November through the Lunar New Year in Asia in January or early February the busiest period for jewellery sales. January is also a seasonally busy month for the rough sector as traders and manufacturers return to the market after working down their inventories over the festive selling period.

Okavango Diamond Company was established in 2012 following the renewal of the Debswana Sales Agreement between the Botswana government and De Beers. When it was formed, the rough diamond marketing company was allowed to purchase and sell 12 percent of Debswana’s production, rising to the current 15 percent since 2016. The company is an important supplier to the market with sales in the region of $500 million per annum.

The drop in Okavango Diamond Company’s sales was widely expected after De Beers’ total rough diamond sales were flat at $2.9 billion in the first half. Moreover, Botswana’s central bank had reported previously reported that exports of rough diamonds that De Beers mined in Botswana declined 2.5 percent to $1.67 billion in the first half of the year of 2018.

Shipments fell 6 percent year on year to $758.1 million in the second quarter, after increasing 0.3 percent to $915.5 million in the first. The figures refer to goods that Debswana, De Beers’ joint venture with the country’s government, produces and sells to De Beers Global Sightholder Sales and Okavango Diamond Company.

The mining giant holds ten Global Sightholder Sales and Auction Sales every year in Gaborone and the sights or auction sales are restricted to its sightholders who buy the diamond packages at a price determined by De Beers. Gaborone has now emerged as an important rough sales centre after the decision to move De Beers’ sorting operations and sight location to Gaborone in 2013.

De Beers sells an estimated 90 percent of its production through its long-term contracts with sightholders, with the current contract set to end in March 2019.The remaining 10 percent is sold at its auctions. The company has 67 global sightholders, 17 in Botswana, six in South Africa, nine in Namibia, one in Canada and three receiving industrial rough supply. Sightholders in southern Africa have to manufacture the majority of their supply in those countries. De Beers also makes available any excess supply ÔÇô known as ex-plan ÔÇô to 14 accredited buyers across its various sights.

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