BRUSSELS — Antwerp diamond dealers will complain to Europe’s antitrust authority that De Beers’ sales and marketing system is crushing competition and has led to a rapid hike in prices, the dealers’ trading group said.
The president of the Belgian Polished Diamond Dealers Association said yesterday it would complain about De Beers’ “supplier of choice” scheme, through which it supplies rough diamonds to selected customers known as sightholders.
“We see less and less merchandise on the market, we notice that prices have increased 40% in the past two years, and we think that the supplier of choice strategy and all the obligations imposed by De Beers are really restricting trade,” association president Andre Gumuchdjian said.
De Beers-approved sightholders cut and polish diamonds, and sell them on to wholesalers or jewellers.
The association represents polished diamond dealers in the Belgian port of Antwerp, one of the world’s main diamond hubs.
They buy polished diamonds from manufacturers — sightholders and others — and sell them wholesale to jewellers and jewellery makers.
The European Commission, which polices competition in the 25-state European Union, cleared the supplier of choice scheme in 2003 but said it would “remain watchful” to ensure the market stayed competitive.
Gumuchdjian said the group was likely to lodge a complaint in the next two weeks.
De Beers, the world’s biggest diamond producer, is 45% owned by mining conglomerate Anglo American.
It sold $5,7bn worth of rough diamonds last year through its Diamond Trading Company.
Meanwhile, De Beers said yesterday it was reviewing the underground operations at its old Kimberley mine, which are expected to incur losses of R150m this year.
“The three Kimberley underground mines are over 100 years old and this year they are projected to incur a loss of R150m,” said Vukani Magubane, head of corporate affairs for De Beers’ South African unit.
Magubane declined to say if the unit, De Beers Consolidated Mines, might close the underground operations, but said they were nearing the end of their life as reserves became depleted.
“Let’s engage with our key stakeholders and find out how to mitigate that because it’s not a sustainable business model,” said Magubane.
The underground mines now only account for about 10% of total output at the Kimberley operation, which also comprises two treatment plants.
The review at Kimberley comes after De Beers Consolidated said in February it might have to cut 13,5% of its 9442 jobs in SA since five of seven mines were operating at a loss, mainly due to the strong rand that cuts export income.
That broader strategic review is due to conclude at the end of this month, said Magubane.
The rand strengthened more than 130% between late 2001 and the end of last year, hitting miners and other exporters since their foreign exchange earnings in dollars shrink when translated into rands.
In recent weeks, however, the rand has weakened.
Last year De Beers’ South African output increased 15% to 13,7-million carats.
Total De Beers production last year rose 7% to 47-million carats, with Botswana by far the biggest contributor with an output of 31,1-million carats.