The world’s largest diamond hub in the City of Antwerp, tracing its origin as far back as the middle of the 15th century, came to its prominence soon after the Eureka Diamond, the first stone of this kind discovered in South Africa, caused a massive inflow of rough diamonds to the cutting and polishing workshops in the city fueling consumer demand and giving diamond dealers an opportunity to accumulate incomparable experience valid up to now. This heritage is treasured by the Antwerp World Diamond Centre (AWDC), representing Belgium’s diamond sector and making every effort to promote diamonds in the face of challenges arising in the rapidly changing global market. Interviewed by Rough&Polished, Stéphane Fischler, President of AWDC talks about the events scheduled by the Centre for the coming new year and shares his views on the problems in the diamond industry.
Next January, BrilliAnt®, the 8th edition of the Antwerp Diamond Trade Fair, will be opened for international exhibitors. In what way will this change the usual business competition pattern for Antwerp-based diamantaires?
The Antwerp Diamond Trade Fair, an initiative from the Antwerp Bourses and powered by AWDC has received a large number of enquiries from international diamond companies to be able to exhibit at the ADTF. The organizers believe that it is the right time to invite international suppliers to participate and enlarge the already impressive volume of diamonds to be exhibited. It is a natural evolution for a fair located in the largest international trading center.
Could you shed some light on the scale acquired by this event since its debut in 2010 and maybe provide some numbers for our readers?
As I mentioned already, the AWDC is happy to once again power the fair. One innovation of the 2017 edition will be the presence of foreign exhibitors. For the rest I would suggest leaving this to the Bourses’ organizers to reply.
What was the performance of Antwerp’s diamond trading this year? Was it better or worse compared to 2015?
First of all, we have a great team of highly motivated and top professionals at the AWDC that contributes to reinforce our market positions. They deserve to be recognized.
Regarding the market. First and foremost, the midstream is a reflection of human nature: more or less equally rational and irrational depending on circumstances. I believe the trading environment has overall improved compared to 2015. No doubt, rough trading has been very strong in Antwerp. As for polished, I would venture to say that we have not seen a dramatic improvement. Prices have remained on average more or less stable. In some particular sizes and clarities there has been strong demand, whereas in others the prices have no doubt weakened.
The rise of the dollar and probably sooner than later interest rates is something to watch, especially for major economies with large debts. Also, as higher supplies from miners are expected.
The same miners have set down impressive results in 2016 and by far outperformed the midstream. Again manufacturers' margins have overall been under pressure. Pushing weakened players to undersell polished, which then impact pricing.
A couple of issues of concern. First, the chaos created by sudden demonetization in India has no doubt affected rough demand, as well local retail sales. We can only hope this disruption will be short-lived as our colleagues in India are assuring us. Small goods are disproportionally affected. The main issue the Indian government will have to deal with and fast, is the comparatively low penetration of automated payment infrastructure. By the way, the impact of a “cash-less” economy on a product as discretionary as diamond will be felt. I know it is a big topic. But the removal of the right to privacy is serious concern. Switzerland has decided to protect privacy and have set a cash limit of below CHF 100,000 (around USD 98,500) on “anonymous” cash.
Then the reports of undisclosed synthetics in the pipeline to which, and I would like to insist on this, the GJEPC and BDB are to be commended for having rightly taken strong actions against criminals, are still a concern. But less so than before due to the much larger penetration of detection hardware.
We are operating now in a more challenging geopolitical landscape. Many new leaders are emerging with little foreign policy experience and are challenging free trade agreements. In export, duties and trade incentives impact financial transparency. Risk premiums could be affected. Our industry tends to forget that it is as exposed to “Black Swan” events as any other. As the saying goes, we can safely predict unpredictability.
To conclude on a more positive note, I want to stress that on a global scale there is currently improved economic data related to manufacturing and jobs that is encouraging.
Now that Dubai is getting its share of diamond trade, while India intends to offer a domestic trading platform for diamond miners and there is the Eurasian Diamond Centre emerging in Vladivostok, will it be still correct to say that 80 percent of the world’s production of rough diamonds is traded in Antwerp?
Yes, this is still the case. I know many have had doubts on the ability of Antwerp to maintain its position, but we did so successfully. Our new Tax Plan should be soon operational. New productions have come on stream and have chosen Antwerp as the center for their trading operation. We just had the first sale of Stornoway diamonds, and also some equally beautiful new production from the Brauna mine in Brazil. And there are other junior miners that discover our experience and skills at supporting them in reaching very competitive prices. As for Dubai who has managed to build in a very short time an impressive infrastructure, or any other center for that matter, it is important to leave behind the “zero sum” strategy, but rather focus on value addition. We must all together play our role to grow the market and contribute together to secure consumer confidence.
While the Kimberley Process is discussing the diamond valuation issue, some industry observers indicate that any new valuation system could be applied only to a small segment of diamond production, leaving out major diamond mining companies, like ALROSA and De Beers, and thus failing to be universal. Could you share your view of this problem?
My view is very clear. The valuation issue relates primarily to exporting countries’ ability to raise their fair share of taxes and to the actors on the ground to achieve decent income. Some countries have done a much better job than others. Why? Because they have, with time, decided to acquire the necessary capacity and skills and ensure proper governance and avoid corruption. But of course, all this depends on the will of the governments and local actors. No will, no way.
Currently, synthetic diamond sellers are increasing their attempts to force open the market of natural diamonds for their goods. Do you think the effort made by the Diamond Producers Association (DPA) to promote natural diamonds will be enough to offset the ‘synthetic threat’?
There is a total misunderstanding of the aim of the DPA campaign. This is not a campaign AGAINST any product be it synthetic or not. It is a campaign FOR the promotion of diamonds.
There is no synthetic competitive “threat” at all. There are only a few criminals trying to pass synthetics as diamonds. I have no issue at all with any competing product. Be it Swaroski crystals, CZ, Moissanite or synthetic diamonds. They all have or will find their markets.
I am very supportive of the underlying strategy and message proposed by the DPA. It is very important that this succeeds in conveying the intended message. I call on those in the industry to leave their initial doubts behind and be fully supportive.
The ethical aspect in producing diamond goods seems to weigh ever more heavily these days and even turn into an apple of discord between synthetic and natural diamond producers. What is your take on this situation?
The ethical aspect of trading does not weigh more heavily now than in the past. It remains as critical as it has always been. Absolutely no change or evolution here. Indeed, we may be confronted with a more inquisitive public than in the past, but our focus on ethics has never changed. People who intentionally misrepresent their product are criminals and must be treated as such. Diamonds must continue to be traded, as in the past, responsibly and ethically. The challenge is for the synthetics producers to find their own niche not by denigrating diamonds but by praising their man-made product in, and I stress it again, a both responsible and ethical manner.
The World Diamond Council (WDC), which has developed the System of Warranties extending the confirmation of non-conflict origin of rough diamonds further down the chain, is mulling to produce a cross-functional marker to be used by industry stakeholders. Could you elaborate on its essence?
It is an evolutionary process, where the experience gathered has encouraged us to review the present system. We are definitely looking at strengthening it. As it is still under review, it would be premature for me to elaborate. I can only say that the board includes the leading associations (CIBJO-WFDB-IDMA) which are fully involved.
The City of Antwerp is expected to launch a diamond year in 2017 under the slogan of “Antwerp, shaping the Diamond Story.” What will be the role of the Antwerp World Diamond Centre (AWDC) in this celebration?
This special thematic period is being organized to celebrate the 550-year connection between the City of Antwerp and its diamond industry. As the City, AWDC will also be organizing a wide range of activities aimed at a variety of target groups: from elementary schoolchildren to master’s students, and events for Millennials and tourists.
Will you highlight some other events the AWDC is going to roll out for industry stakeholders in the coming new year?
Our new campaign, “Diamonds and Antwerp, it’s in our DnA,” will be rolled out further on the national as well as international level. We will continue and expand our international buyer program, called the “Antwerp Diamond Experience,” to also include a special focus on a number of European polished diamond markets.
Vladimir Malakhov, Rough&Polished