The Israel Diamond Exchange (IDE) and the Israel Diamond Manufacturers Association recently hosted the biennial Presidents Meeting of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) in Tel Aviv, Israel from 14 to 16 June.
Over the three days, international industry leaders discussed issues affecting the global diamond trade, with the main themes identified as being the lack of profitability within the sector, banking and financing, synthetic diamonds and over-grading.
WFDB president Ernie Blom and IDE president Shmuel Schnitzer agreed that the falling profitability within the sector was the most critical issue – specifically the high prices placed on diamond rough.
Blom said it was important for diamond producers to understand that if diamond manufacturers could not afford the rough they were selling, they would ultimately have no business. He also pointed out that manufacturers were not blameless in the matter: “[Some] of our members are responsible in that they are paying ever-higher prices for goods. This leads to a continuous price spiral upwards for goods.”
Declining bank credit was another issue that was raised, with Blom stating that WFDB members were constantly facing an “uphill battle” to secure funding for their diamond operations. This was said to be mainly due to the banks’ concerns about industry transparency, such as unqualified reports, price discovery, pre-post delivery and mitigation risk.
Blom said banks needed to understand that the diamond industry had recognised that change was required, however, it would take time. “It [change] won't happen overnight, but in the meantime it is not possible to choke off credit. We must have a partnership built on trust that both sides completely understand the position of the other.”
Blom said banks needed to understand that the diamond industry had recognised that change was required, however, it would take time. “It [change] won't happen overnight, but in the meantime it is not possible to choke off credit. We must have a partnership built on trust that both sides completely understand the position of the other.”
Maintaining transparency
When the topic of industry transparency was broached, Blom stated there could be “no question of flexibility” when it came to over-grading.
On the topic of synthetic diamonds, he noted that such stones, when disclosed, might not be a threat so much as an opportunity, suggesting laboratory-grown diamonds could potentially be a catalyst for high sales of natural, mined stones, and attract younger demographics to the diamond jewellery market.
Blom also reported on the issue of diamond price lists, specifically the list published by Martin Rapaport, chairman of the Rapaport Group, which operates online diamond trading platform RapNet. He said there was considerable concern about the list, particularly following a recent drop in prices that had not been regarded by the industry as justified.
Schnitzer said Rapaport’s decision-making process needed to be more transparent, and Blom stated that the WFDB had set up a committee with IDMA to discuss the matter with Rapaport directly as a high priority.
Looking forward
On the final day of the congress, the joint working session of the WFDB and IDMA was addressed by De Beers CEO Philippe Mellier, who said diamantaires needed to make sustainable returns so they could make investments in key areas such as new technology, marketing activities and business efficiency to underpin further growth.
Discussing other ways through which sustainable returns could be achieved, Mellier said, “First, there is a need to generate consumer demand growth downstream – this supports the value of diamantaires’ polished diamond sales.
“Second, there is a need to facilitate efficiency and maintain third party confidence in the midstream – this will reduce diamantaires’ operating costs. And third, there is a need to maintain availability upstream – this will limit the escalation in diamantaires’ input costs.”
The WFDB is an international non-profit organisation established in 1947 that promotes consumer desirability and confidence in diamonds. The IDMA was founded in 1946 and aims to encourage honesty and best practice in the global diamond industry. The IDMA convenes with the WFDB on a biennial basis to pass joint resolutions on global diamond industry issues of concern.
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