De Beers Changes Course

May 30, 2000

De Beers Changes Course

London's Guardian newspaper reported today De Beers will formally abandon its 60-year-old policy of trying to stabilize diamond supply and demand through the Central Selling Organisation and will instead concentrate on mining and marketing. The official announcement from De Beers is expected on July 12.

The Financial Times described the change as De Beers' effort to clean up its cartel image by formalizing its supply relationship with uncut diamond clients and making clear previously secretive and unspecified criteria for granting those clients admittance to meetings where diamonds are allocated.

At the next meeting, starting July 12, De Beers' London-based CSO is expected to present its 125 clients with a set of rules specifying conditions to assure a continued supply of rough diamonds to clients.

"The move marks a unique shift in the CSO's traditionally secretive approach, which is based on unwritten understandings between supplier and client," says the Financial Times. The CSO controls some 65 to 70% of rough diamond supply to the world market. The Financial Times also reports De Beers plans to use the name Diamond Trading Co. in place of CSO in future dealings with the market.

Russia's Itar-Tass news agency earlier reported De Beers would drop the policy of absorbing overproduction of uncut diamonds to shore up prices in favor of expanding its diamond output and stimulating demand for its own diamonds.

This move is the biggest change spurred by De Beers strategic review, an ongoing internal revamping of business operations to benefit shareholders. It follows De Beers' decision last year to test-market diamonds under its own name – an experiment the company says met with success.

- by Mark E. Dixon