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3 posts from September 2006

De Beers and Alrosa in the News Again

De_beerscompany Two titans of the diamond industry are in the news again.  De Beers announced in February of this year that they would not purchase rough diamonds from Alrosa after 2008.  This was a response to the European Commission’s probe into the potential monopoly abuse relationship between De Beers and Alrosa.

De Beers controls half the world market of rough diamonds and Alrosa, the Russian diamond producer, now mines a fourth of the world’s supply.  De Beers has been buying diamonds from Alrosa since the early 1960s and Alrosa would like that relationship to continue because without De Beers, Alrosa has to do more cutting and polishing, which is a lower margin part of the diamond industry.

Last year EU said it had concerns that the volume of Alrosa’s rough diamonds purchased by De Beers might strengthen De Beers’ market share to the point of eliminating Alrosa as an alternative source of rough diamonds for cutters.  Alrosa launched an appeal of the EU settlement.  They are optimistic for a positive decision allowing Alrosa to continue selling diamonds to De Beers.

Earlier this month, De Beers and Alrosa agreed to purse joint prospecting projects in Russia and other parts of the world.

Harry Winston Acquisition by Aber

Logo_aber_1Aber Diamond Corporation’s principal asset is its 40% interest in the Diavik Diamond Mine, located in Canada’s Northwest Territories.  Aber has now made its mark on the retail side of the diamond industry as it has entered into an agreement to purchase minority interests in Harry Winston, giving it 100 percent ownership.

Harry Winston is one of the leading name brands in the luxury goods segment, which includes diamond jewelry, of the consumer market.  Ownership by Aber ensures that Harry Winston will have a steady source of –high-quality polished diamonds and the acquisition of Harry Winston gives Aber a bigger share of the overall diamond market and increased margins.

Aber acquired an initial 51 percent of Harry Winston in April of 2004.  Since Aber’s initial investment, Harry Winston sales grew from about $128 million to a projected $191 million for 2006.

Demand for Palladium Drives Price Up

The jewelry industry has focused its attention on palladium in recent months as the record high price of platinum made palladium an attractive alternative.  While the biggest usage of palladium is for automobile pollution-control devices, jewelry now uses 14 percent of this precious metal.

Jewelry consumption of palladium is projected to grow 8 percent this year to over 1.2 million ounces.  This increase in demand has spurred a 76 percent increase in price this year to $330 per ounce.  The engine behind palladium’s growth has been China’s jewelry industry that now represents 69 percent of the world’s palladium jewelry.  The United Statues now makes up 10 percent of the palladium jewelry market and organized marketing of palladium is just getting started.

“Palladium is going to explode on the fine jewelry market like no other metal ever has,” predicts Scott Kay, CEO of Scott Kay Inc.

Palladium is now a prime choice for high-purity, luxury white metal.  With the price of palladium about half that of gold and a fourth that of platinum, palladium is not only less expensive than gold or platinum, but is also lighter and therefore more cost effective.

PdlogosmallConsumers not only like the lower price of palladium jewelry, they also are attracted to the fact that palladium is brighter than platinum or white gold, is hypoallergenic for sensitive skin, does not tarnish, and does not need plating to retain the whiteness.

Montana-based Palladium Alliance International (PAI) is providing the marketing push to get the message out to the consumers.  Formed in March of this year, PAI strives to position palladium as peer, rather than an alternative, to platinum and white gold.

Many jewelry designers feel that palladium is already a superior metal to platinum for jewelry design and expect that once consumers learn more about this beautiful white metal, demand will soar worldwide.