Diamond Industry News: Updates Of Diamond Auctions And Tenders [March 2024]

The start of 2024 has seen many newsworthy events in rough diamond sales:

• Trans Atlantic Gem Sales (TAGS) sold $25m rough in February, an increase from $14m rough in January.
• De Beers brought in $430m in February, an increase from $374m in January.

This indicates that rough diamond demand is still lower than usual. However, the market is in the process of returning—albeit slowly and cautiously.

In this article, you’ll discover how to adjust the sales strategy of rough diamonds based on market conditions. You’ll learn:

• When to switch to tenders - and auctions (and vice versa) for maximum revenue.
• How to know when to switch sales strategies based on covert market signals.
• How to choose technology that allows you to make that switch easily and effortlessly

Tenders Or Auctions In Volatile Market Conditions

It’s no secret that 2023 was rough for the rough diamond industry (no pun intended).

For the diamond mining giant De Beers, the last two Sights of 2023 generated only $216 million. A steep fall from the $871 million recorded the previous year.

As a strategy to stimulate sales, De Beers reduced prices for its rough diamonds across the entire spectrum by at least 10%.

Furthermore, at the first sight of the year in Gaborone, Botswana, some larger diamonds were even available at discounted rates of up to 25%.

And then, early this year, while stimulating sales during reduced market demand, De Beers has also modified their sale strategy and switched to sealed bids. But why does it matter?

De Beers represents the diamond industry market and often generates followers in the market dynamics. If De Beers reduces prices and even moves to a different sale approach like sealed bids, then smaller mining firms looking to maximize revenue might be advised to do the same.

Now, you might already have a similar sales strategy. But are you certain that it’s the right one for you? Or are you leaving potential revenue on the table?

Let’s look at history to determine the best sales strategies:

Rough Diamond Industry And The Risk Of Price Inefficiency

In the early 21st century, because of increased competition and financial crises, the go-to sales strategy that was gradually implemented in the rough diamond market was Tenders.

As a reference:

• Auctions refer primarily to ‘ascending clock auctions.’ The pricing is more transparent, with price discovery happening over multiple rounds. Buyers have an opportunity to see how many bidders have bid on the same lot.

• Tenders refer to ‘sealed bids’. The pricing is not transparent, and buyers rely on their own analysis to determine the best price (and have no way of knowing how many bidders are also interested in the lot). Tenders typically reflect opinioned market prices or individual interest.

This created relatively volatile market dynamics, which are a breeding ground for pricing inefficiency:

Image source: Cramton et al. (2012).

You’ll notice a distinct pattern in pricing trends pre-2007, followed by a remarkable transformation upon BHP Billiton’s adoption of auctions.

As the authors wrote:

“The auction approach does a better job of assigning and pricing the mine’s output. Customers compete directly in simple auctions. In this way, the diamonds are allocated to the customers with the highest values, and the prices paid reflect current market conditions. Prices are competitively determined, with much less reliance on the price book.”

Rough Diamond Sales In The Future: Online Auctions

Next to the switch to sealed bids, it’s worth noting that De Beers also added further investment into their online platform.

We expect that this is a strategic investment, making it further difficult for other companies to catch up - in an industry that is innovating at a rapid pace.

So, instead of innovating by building your own technology, we strongly suggest investing in an already existing solution.

Why? Because most companies strongly underestimate the continuous effort and cost required to maintain their custom-built solutions.

BidGemmer is an industry-leading software with a comprehensive ecosystem that makes online auctions and online tenders plug-and-play.

Our technology has been used to sell over $160B+ in auctions and has been in the market for 10+ years. You can learn more about our software here, or request a demo.

Conclusion:

As we look at the rough diamond industry at the beginning of 2024, it’s becoming increasingly evident that the market is rebounding - although slowly and cautiously.

As such, we recommend you to challenge your selling strategies - which may reduce pricing inefficiency in volatile markets and lead to higher revenues.